Why do prices have to be based on supply and demand, rather than cost?
A) Costs, unlike supply and demand, are based on subjective factors.
B) People cannot be compelled to base prices on costs
C) People should be free to set whatever prices they prefer.
D) Supply and demand determine costs.
E) Because basing prices on costs is less efficient than basing prices on supply and demand.
D
You might also like to view...
When economists describe "a market," they mean
A. any place where stocks and bonds are traded. B. a hypothetical place where the production of goods and services occurs. C. a communication network that allows individuals to keep in touch with each other. D. any place where, or mechanism by which, buyers and sellers interact to trade goods, services, or resources.
Winnie's Car Wash is a perfectly competitive firm. The table above shows Winnie's total product schedule. If the price of a car wash is $4 and the wage rate is $50 per day, how many workers should Winnie employ to maximize his profit?
A) 1 B) 2 C) 3 D) 4
Stagflation
a. is caused by a negative demand shock b. is theoretically impossible c. is a long-run phenomenon d. was rampant during the Great Depression e. is the combination of rising price levels and negative GDP growth
What should be the price level of the tradable permits to achieve the cost-effective solution?
Suppose two point sources are discharging phosphorus into Wisconsin’sFox River and face the following abatement costs for this pollutant: Point Source 1: TAC1 = 500 + 0.35(A1)2 MAC1 = 0.7A1 Point Source 2: TAC2 = 750 + 1.05(A2)2 MAC2 = 2.1A2, where A1 and A2 represent the abatement of phosphorus effluents in pounds by Source 1 and Source 2, respectively, and TAC and MAC are measured in hundreds of dollars. Assume that the state environmental authority has set the total maximum daily load (TMDL) for the Fox River. To achieve this limit, 40 pounds of phosphorus must be abated across the two point sources. Use this information to answer the following questions.