Discuss the difference between a private cost and a social cost
What will be an ideal response?
A private cost is the cost of producing a good or service that is borne by the producers. In certain instances, however, some of the costs of production are borne by someone other than the producer. This cost is called an external cost. The social cost is the total cost borne by all of society. Thus the social cost equals the private cost, the costs borne by the producers, plus the external cost, the costs borne by everyone else.
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In monopolistic competition, a firm must determine what price to set for its good because
A) the demand for its good is not perfectly elastic. B) the demand for its good is perfectly elastic. C) there are many buyers. D) there are many sellers.
Aimee sells hand-embroidered dog apparel over the Internet. Her annual revenue is $128,000 per year, the explicit costs of her business are $42,000, and the opportunity costs of her business are $30,000. What is her accounting profit?
A) $12,000 B) $56,000 C) $86,000 D) $98,000
What form of irrational behavior can cause asset price bubbles?
A) People do not based their investment decision on the fundamental value of the asset but only on the belief that the asset price will continue to increase. B) People accidentally buy assets that they did not want, and this drives up the asset price. C) Asset owners panic and begin to sell their assets as quickly as possible. D) People throw darts at a list of stocks and buy whatever the dart lands on without thinking about the reasons.
Increases in the overall price level:
A. result in an increase people's dollar-denominated wealth. B. mean that a given number of dollars can buy as much in terms of real goods and services as before. C. tends to cause people to increase their consumption. D. reduce people's real wealth.