Suppose you are planning to sell your house. You value your house at $200,000. If you do not hire a realtor, you will be able to sell your house to a buyer whose reservation price is $220,000. If you hire a realtor, you will be able to sell your house to a buyer whose reservation price is $250,000. Assume that the realtor's opportunity cost of negotiating the sale is $5,000. In this case, how much additional economic surplus is generated by using a realtor to sell your house?
A. $25,000.
B. None, because you value the house at $200,000 no matter who buys it.
C. $200,000.
D. $250,000.
Answer: A
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A. $50. B. $5. C. $15. D. $135.
Private producers have no incentive to provide public goods because
A) they cannot avoid the tragedy of the commons. B) production of huge quantities of public goods entails huge fixed costs. C) once produced, it will not be possible to exclude those who do not pay for the good. D) the government subsidy granted is usually insufficient to enable private producers to make a profit.
Suppose, before the Asian financial crisis, the Thai baht was fixed against the dollar at a rate of 26 bahts for one U.S. dollar. If the exchange rate were allowed to float freely, the market would then set the rate at 35 bahts for one dollar. Under these circumstances, we say that the baht was:
a. about to appreciate. b. fixed below its par value. c. overvalued. d. undervalued. e. revalued.
When a monopolist increases the quantity that it sells, all else equal, total revenue increases, which is called the output effect
a. True b. False Indicate whether the statement is true or false