Your upstairs neighbor is the first-chair violinist in the local symphony orchestra. Because you are very fond of violin music, you sit on your balcony each night to listen to her rehearse. In this case, your violin-playing neighbor is an example of a
A. Pareto good.
B. good that provides an external benefit.
C. public good.
D. good that imposes an external cost.
Answer: B
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Assume that coffee and tea are substitutes. Given a downward sloping demand curve for tea, an increase in the price of tea will cause
A) an increase in the demand for coffee. B) a decrease in the demand for coffee. C) a leftward shift of the demand curve for tea. D) a leftward shift in the demand for coffee.
What do you mean by the term 'equilibrium wage'? a. It is the wage that is determined when potential employers and potential employees are free to transact as they wish. b. It is a wage determined by the government with an intention to narrow the gap between the higher and the lower income groups. c. It is a wage at which the workers refuse to offer labor
d. It is a minimum possible rate that an employer must pay in order to hire a labor. e. It is a wage at which there is an excess supply of workers.
A firm uses two inputs, labor (L) and capital (K) in the production of umbrellas. It can invest $50,000 in the purchase of the two inputs annually. The firm hires 5 units of capital at $1,000 per unit. If the going annual wage rate is $4,500, calculate the number of workers employed by the firm. (Assume that the firm spends the entire budget on K and L.)
a. 10 b. 5 c. 15 d. 9
Mention some of the ways in which the problem of asymmetric information can be reduced