If a developer plans to build a skyscraper in a major city overshadowing an historic church, could an efficient solution be reached if the church had the legal right to prevent the developer from building in that location? Why or why not?
Yes, an efficient solution could be reached if the property rights were well established. In this case, if the builder's value of developing the site was greater than the church's value of no development, the builder could potentially compensate the church for an amount that would make both parties better off.
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A newspaper story on the effect of higher milk prices on the market for ice cream contained the following:
"As a result [of the increase in milk prices], retail prices for ice cream are up 4 percent from last year. . . . And ice cream consumption is down 3 percent." Source: John Curran, "Ice Cream, They Scream: Milk Fat Costs Drive Up Ice Cream Prices," Associated Press, July 23, 2001. Based on the information given, what is the price elasticity of demand for ice cream? A) 12% B) 0.75 (in absolute value) C) 1.33 (in absolute value) D) We do not have enough information to calculate the elasticity.
A monetary policy strategy that uses a fixed exchange rate regime that ties the value of a currency to the currency of a large, low inflation country is called ________ targeting
A) exchange-rate B) currency C) monetary D) inflation
Suppose that there are two types of houses for sale: those with solid foundations and those with cracked foundations. In all other respects, the two types of houses are identical. Houses with solid foundations are worth $200,000, while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack, or $180,000. Sellers know which type of house they have, but buyers cannot detect whether the foundation has a crack. Suppose that 80 percent of the houses for sale have a solid foundation and 20 percent of the houses for sale have a cracked foundation. If buyers are risk-neutral and know the that 80 percent of the houses for sale have a solid foundation while 20 percent have a cracked foundation, then how much will buyers be willing to pay for a house?
A. $160,000 B. $180,000 C. $196,000 D. $200,000
Fast-second strategies are more likely to be used by:
A. dominant firms than by start-up firms. B. pure competitors rather than by oligopolists. C. start-up firms rather than by existing firms. D. entrepreneurs rather than by corporations.