What is economic value of an exchange?
Economic value of an exchange is defined as the difference between the buyer's valuation of the good and the seller's opportunity cost of parting with the good.
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How are the slope of a production possibilities frontier and the opportunity cost of the goods related?
A. The slope is a graphical representation of the cost of expanding production of both goods. B. The slope is a graphical measure of the growth rate of the economy. C. The slope is a graphical representation of the cost of decreasing unemployment. D. The slope is a graphical representation of the rate of trade-off between the goods. E. The slope is a graphical representation of the cost of economic growth in the economy.
Menu costs are a possible reason for
A) swings in the labor force participation rate. B) low levels of consumer confidence in response to aggregate supply shocks. C) aggregate supply shocks. D) sticky product prices.
The above figure shows a payoff matrix for two firms, A and B, that must choose between a high-price strategy and a low-price strategy. For firm B,
A) setting a high price is the dominant strategy. B) setting a low price is the dominant strategy. C) there is no dominant strategy. D) doing the opposite of firm A is always the best strategy.
The above figure shows the marginal benefit to a firm of polluting in the local river while producing its output, and the marginal cost to the surrounding neighbors. The marginal cost of production is zero for the firm
According to Coase's Theorem, which of the following scenarios is most likely to lead to the socially optimal level of pollution? A) The firm owns the river and there are a thousand surrounding neighbors. B) The firm owns the river and there is just one nearby neighbor. C) The river is jointly owned by one thousand surrounding neighbors. D) The firm owns the river, and therefore produces the social optimum no matter what.