Sanjay has an ATV that he values at $3,000. Marilu is looking for a similar ATV but will only pay up to $2,400
Will trade between these two occur? Is there a policy government could implement that would encourage a trade to occur between Sanjay and Marilu? If so, what is that policy and will the policy make society richer?
In a free market, no trade will take place. Government could subsidize the trade to encourage the trade to take place. If the government offered a subsidy of $700 to ATV buyers, Marilu could spend up to $3,100 on the ATV but only be $2,400 out of pocket, so there is no consumer surplus. Sanjay would receive $3,100, so his producer surplus is $100. This total gain in surplus of $100 is offset by the $700 loss to taxpayers, so society ends up $600 poorer.
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Answer the following statement(s) true (T) or false (F)
1. Nonexcludability refers to the possibility that the benefits of consumption can be shared. 2. The market demand for a public good such as environmental quality is found as the horizontal sum of all the individual demands for that good. 3. If the market for a public good is comprised of two consumers, 1 and 2, who have individual demands of p1 = 100 – 0.2QD and p2 = 250 – 0.5QD, then the market demand function would be P = 350 – 0.7QD. 4. If the third-party effects of a good generate benefits to a third party, it is a positive externality. 5. If MSC = 40.0 + 0.25Q, and MPC = 40.0 + 0.14Q, then production is associated with an externality specified as MEC = 40.0 + 0.36Q.
A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for
the product will be A) A. B) B. C) C. D) D.
The theory that there is no way to "get rich quick" in securities due to a lack of predictable trends is
A) no-win theory. B) market trend analysis. C) random walk theory. D) trading.
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point D to Point B, the opportunity cost of hybrid cars, measured in terms of motorcycles,
A. initially increases, then decreases. B. increases. C. remains constant. D. decreases.