Assume that the supply curve is horizontal because marginal cost is constant at $10. John, Robert, and Jimmy each value one compact disc at $20 but only Jimmy and John value a second compact disc (Jimmy at $5 and John at $15). If a social planner dictates that five compact discs be produced and distributed to John, Robert, and Jimmy, then even if the compact discs are allocated based on demand, this market will lose out on $___ of value.
a. $5.
b. $10.
c. $15.
d. There will be no lost value as five compact discs is the efficient level..
a. $5.
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Downward wage rigidity:
A) leads to frictionless labor markets. B) causes the wage to be above the market clearing wage. C) helps lower unemployment. D) is common only in industries with strong labor unions.
Using supply and demand curve analysis, the triangular area above the equilibrium price and under the demand curve is:
a. consumer surplus. b. producer surplus. c. marginal cost. d. deadweight loss.
What is the main problem with using physical units, instead of dollars, as the measure of total economic activity?
a. Other countries do not use units of measurement. b. Units of measurement are more difficult to calculate than dollars. c. Physical units of measurement change from year to year. d. Different products have different units of measurement.
Money eliminates the need for:
A. specialization of labor. B. financial Intermediaries. C. government regulation. D. a search for a double coincidence of wants.