Many cities have summer pops series in which the local orchestra performs light classical music in a public park. These performances are free in some areas. Apply the concept of a public good to pops performances and explain whether an admission charge is efficient.
What will be an ideal response?
Pops performances are nondepletable in the sense that music reaching my ears takes nothing away from the ears of others. Exclusion may be possible, in which case free riders can be prevented from attending. However, if there is no MC from an additional user, efficiency calls for a zero price even if exclusion is possible. Naturally, if there are detrimental externalities, such as congestion or parking on nearby lawns, this may call for pricing the good; this goes beyond the question, which said to apply public good concepts.
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Refer to Table 7.1. As labor inputs increase from 5 to 6, output
A) increases by 98 units. B) increases by 16 units. C) increases by 12 units. D) increases at a negative rate.
The law of demand states that
a. there is a positive relationship between price and quantity demanded b. price is the only factor that influences the quantity that people are willing and able to buy c. price and quantity demanded are inversely related d. the demand curve shifts whenever the price of a good changes e. by producing a product, firms create a demand for it
Suppose an economist tests the theory that when the price of leather increases, fewer pairs of shoes are produced. He observes more shoes being produced when the price of leather increases. At the same time, a new production technology allowed for more shoes to be produced in less time. He has
A. has confused association and causation. B. cannot test his theory because his observations violate the ceteris paribus assumption. C. used normative economics to answer a positive question. D. built a model with too many variables.
To circumvent the problem of double marginalization:
A. transfer prices must be set that maximize the overall value of the firm rather than the profits of the upstream division. B. firms should vertically integrate. C. firms should engage in two-part pricing, unless it is possible to engage in either first-or second-degree price discrimination. D. None of the answers are correct.