Answer the following statement(s) true (T) or false (F)
1.Whether or not people have identical tastes, the marginal entrant is indifferent about using a common property.
2. Whether or not people have identical tastes, a commonly owned property creates no social value.
3. Whether or not people have identical tastes, free entry to a common property leads to a suboptimal outcome.
4. The problem with splitting checks is that no one orders as much as they truly want to eat in order to keep the total bill low.
5. A market failure occurs when the government steps in and failingly attempts to alleviate the tragedy of the commons.
1. True
2. False
3. True
4. False
5. False
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As long as the market sets prices above marginal costs, production will be efficient.
Answer the following statement true (T) or false (F)
A manufacturer of wood chippers estimates that the probability of a fatal accident caused by the design of its product is 1/40,000 and the value of a life lost is $2 million
The manufacturer can change the design to eliminate that chance for $60 per wood chipper and is prepared to incorporate all cost-justified precautions. Will the manufacturer change the design? What would the benevolent social planner think about the manufacturer's decision if the true probability of a fatal accident is actually 1/30,000?
Suppose the opportunity cost of producing 1 microwave oven in the U.S. is 100 bushels of wheat; in Korea the opportunity cost of producing 1 microwave oven is 150 bushels of wheat. In these circumstances U.S. consumers will be better off if
A. the U.S. possesses a comparative advantage in the production of both of these goods. B. the U.S. imports microwaves and exports wheat in its trade with Korea. C. the U.S. produces both of these goods. If either wheat or microwave ovens are imported from Korea, U.S. workers will lose their jobs. This would result in lower income and consumption in the U.S. D. the U.S. exports microwave and imports wheat in its trade with Korea.
The law of demand indicates that as the price of a good increases:
A. suppliers sell less of it. B. suppliers sell more of it. C. buyers buy less of it. D. buyers buy more of it.