Is peak pricing economically efficient? Explain. Give an example to illustrate your answer.
What will be an ideal response?
Yes. Economic efficiency requires that prices reflect the marginal utilities involved. If demand rises, then the price may have to rise to allocate the output to the most highly valued usage. If demand falls, then the price will have to fall in recognition of the lower utility, which people derive from the good or service. Therefore, peak pricing, which reflects changes in demand, is efficient. The two examples offered in the text are of peak pricing for commuters on toll bridges and telephone rate differentials between night and day service.
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Refer to the table above. What is the equilibrium quantity of notebooks?
A) 4 units B) 10 units C) 20 units D) 12 units
Which of the following is NOT included in the U.S. current account?
A) U.S. investment abroad B) net interest income C) net transfers D) imports of goods and services
How does the principal-agent problem increase the possibility of moral hazard?
What will be an ideal response?
Your roommate has the right to play her harmonica during the day. But you find the best time to study is during the day, and the harmonica playing makes it hard for you to concentrate. You tell your roommate that you will do her laundry every week if she does not play the harmonica during the day and she agrees to this. This is an example of
A. an injunction. B. liability rules. C. the Coase theorem. D. the drop-in-the-bucket problem.