What are transactions costs? Why do transactions costs create difficulties in finding a private solution to the problem of pollution?
What will be an ideal response?
Transactions costs refer to the costs in time and other resources that parties incur in the process of agreeing to and carrying out an exchange of goods or services. In the case of pollution, there are often both many polluters and many people suffering from the negative effects of pollution. The transactions costs in dealing with the reduction of pollution would include the time and other costs of negotiating and monitoring an agreement, drawing up a binding contract, and purchasing insurance. When many people are involved, the transactions costs can be higher than the net benefit from reducing the pollution and a private solution may not be feasible.
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Acme Tools manufactures anvils, a forging tool. When the price of anvils was increased from $7 to $13, Acme Tools was willing and able to increase production from 1 to 4 units per day. Using the midpoint formula, what is Acme's price elasticity of supply for anvils?
a. 2 b. 1 c. 0.5 d. 4 e. 3.5
The demand to attend a certain college is represented by a downward-sloping demand curve. The supply of spots at the college is represented by a vertical supply curve. At the tuition that students are charged, there is a shortage of spots at the college. If the demand to attend the college rises, but the tuition stays constant, it follows that the
A) GPA required to attend the college will probably rise. B) GPA required to attend the college will probably fall. C) SAT score required to attend the college will probably not change. D) a and c E) There is not enough information to answer this question.
What is it called when the government uses some tool other than money to allocate goods?
What will be an ideal response?
Define the following terms and explain their importance to the study of economics. a. Principle of marginal productivity b. Marginal physical product c. Marginal revenue product d. Derived demand e. Economic rent
What will be an ideal response?