The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer), is $50 as Ed's opportunity cost of selling is $135 and Luis' valuation of the good is $185 . If each gains $25 from this transaction, which of the following conclusions can be drawn?
a. Transaction costs are zero.
b. Luis has higher bargaining power than Ed.
c. Ed has higher bargaining power than Luis.
d. Transaction costs are positive.
A
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Which of the following is not a source of monopoly power?
A. Patents B. Rapid low cost technological change in the industry C. Exclusive control over inputs D. Economies of scale
Assuming price elasticity of demand is reported as an absolute value, a price elasticity of demand of 1.2 indicates an:
A. inelastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price. B. elastic demand, meaning the percentage change in quantity demanded will be less than the percentage change in price. C. inelastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price. D. elastic demand, meaning the percentage change in quantity demanded will be greater than the percentage change in price.
Diminishing marginal returns implies that:
A. marginal costs are decreasing. B. marginal costs are increasing. C. marginal costs are constant. D. marginal costs may be increasing or decreasing.
Which of the following is a characteristic of a monopoly market?
A. one single seller B. easy entry C. The firm is a price taker. D. many suppliers of similar products