1. An individual’s value for a good or service is the:
B. The amount of money he or she is willing to pay.
2. The biggest advantage of capitalism is that:
D. It creates wealth by letting a person follow his or her own self-interest.
3. Wealth-creating transactions are more likely to occur:
D. all of the above
4. Government regulation:
A. provides incentives to conduct business in an illegal black market.
5. An example of a price floor is:
A. Minimum wages.
6. A price ceiling:
B. is an implicit tax on producers and an implicit subsidy to consumers.
D. all of the above
8. A consumer values a car at $30,000 and it cost a producer $20,000 to make the same car. If the transaction is completed at $24,000, the transaction will generate:
C. $6,000 worth of buyer surplus and $4,000 of seller surplus.
9. A consumer values a car at $525,000 and a producer values the same car at $485,000. If sales tax is 8% and is levied on the seller, then the seller’s bottom line price is:
10. Efficiency implies opportunity:
C. Only if accompanied by secure property rights.
Individual Problems Ch.2
2-1 Airlines Delays
The airline will minimize the wait time to less than three hours but at the same time they will not rush it since the have does three hours to work with. In addition with this new fine the airlines are likely to raise the price on plane tickets to compensate for the possibility of been fined.
2-2 Selling used cars
This transaction created value to both the buyer and the seller. The buyer now has a vehicle and the seller got rid of what he/she consider a low value item for money that now he can invest in something else.
2-3 Flood Insurance
If it were not for the subsidies the people living in the flood plain would not afford to live there and would live elsewhere. The money spent by the government could be invested elsewhere.
2-4 Goal Alignment among Physicians
The incentives are aligned to make both the owner and the partner benefit from the profits. The 50% in compensation will benefit the partner in the short run and in the long run the average profits will benefit the seller.
2-5 Kraft and Cadbury
The bid Kraft made on Cadbury made that company more desirable for the rest of the market adding value to it.
2-6 Price of Breast Reconstruction vs. Breast Augmentation
It would seem the surgery for breast augmentation has the lower inflation rate because the customer has to pay completely out of pocket if inflation is too high they will lose business. In contrast to the breast reconstruction is covered by insurance has the ability of a higher inflation rate because the customer will not end up paying the whole amount.
1- A business owner makes 1000 items a day. Each day he/she contributes 8 hours to produce those items. If hired, elsewhere he/she could have earned $250 an hour. The item sells for $15 each. Production does not stop during weekends. If the explicit costs total $150,000 for 30 days, the firm’s accounting profit for the month equals:
2- A business owner makes 1000 items a day. Each day he/she contributes 8 hours to produce those items. If hired, elsewhere he/she could have earned $250 an hour. The item sells for $15 each. Production does not stop during weekends. If the explicit costs total $150,000 for 30 days, the economic profit for the month equals:
3- If a firm is earing negative economic profits, it implies:
D) That more information is needed to determine accounting profits
4- 4.Opportunity costs arise due to:
A) resource scarcity
5- After graduating from college, Jim had three choices, listed in order of preference: (1) move to Florida from Philadelphia, (2) work in a car dealership in Philadelphia, or (3) play soccer for a minor league in...
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