A student wrote: "A production quota is inefficient because it results in overproduction
At the quota quantity, marginal social cost is equal to the market price and marginal social benefit is less than the market price, so marginal social cost exceeds marginal social benefit." If you were the instructor, how would you correct this statement?
The student errs in several important respects. There are errors of omission and commission. Here is a corrected statement: "A production quota is inefficient because (if set below the equilibrium quantity) it results in overproduction underproduction. At the quota quantity, marginal social cost benefit is equal to the market price and marginal social benefit cost is less than the market price, so marginal social cost benefit exceeds marginal social benefit cost."
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The theory of portfolio choice suggests that the most important factor affecting the demand for domestic and foreign assets is
A) the level of trade and capital flows. B) the expected return on these assets relative to one another. C) the liquidity of these assets relative to one another. D) the riskiness of these assets relative to one another.
Which of the following is NOT a potential objective of tying strategies used by firms?
A) Reduce production costs and avoid problems associated with diseconomies of scale B) Protect brand image and ensure product quality C) Meter consumption across different buyers in order to collect a two-part tariff D) Extend a firm's market power from one product market into another market
Scott used $4,000,000 from his savings account that paid an annual interest of 5% to purchase a hardware store. After one year, Scott sold the business for $4,100,000 . His economic profits is:
a. $300,000 b. $100,000 c. -$100,000 d. -$200,000
If a 1 percent decrease in the price of one good generates a 3 percent increase in the quantity demanded for another good, then the
a. two goods are complementary b. cross elasticity between the two goods is positive c. two goods are substitutes d. price elasticity of demand for the good whose quantity demanded increased must be inelastic e. price elasticity of demand for the good whose quantity demanded increased must be elastic