Economics Homework Five Answers - Student Eleven
1. Efficiency is the act of minimizing the waste of time, money, materials, and effort. To reach the maximum efficiency, you must be able to eliminate all unnecessary opportunity costs. I waited in line at the grocery store for 30 minutes which showed a lack of efficiency in the employees.
- Interesting, correct answer! "eliminate all unnecessary opportunity costs" made be think for a while. You're right. Well done!
2. Goods A and B are substitutes. They are substitutes because their cross elasticity is the positive number of 3.8. Goods X and Y are complements. These goods are complements because their cross elasticity is the negative number of -2.7.
3. The marginal cost for another unit would be $ 20.
4. The increase in demand for steak is inelastic and a normal good. The decrease in demand of hamburgers is elastic and an inferior good.
- Correct, except both are inelastic. The income elasticity for the hamburger is -0.2. That's small and not elastic. However, no points deducted because I did not ask about their elasticity.
5. The basic assumption of the Coase theorem is that in the absence of transaction costs, there would be a more efficient and more profitable economy. Transaction costs drive the cost of goods up and out of equilibrium which proves the Coase theorem.
- Close, but a bit incomplete because it does not capture the power of the market to negotiate the best use of property and rights and find the better mousetrap. (Minus 1).
6. When an owner’s marginal revenue exceeds the marginal cost, the owner can sell additional goods. The owner will be able to make more money from the additional goods sold. Marginal revenue is any additional revenue a business earns from selling one more unit.
7. The Coase theorem says that the government is to increase the prosperity of people; however, the government regulations that increase transaction cost actually hinder prosperity rather than increase it. Government should lower transactions costs to increase efficiency and wealth.
- Superb work. 69/70. Very well done!--Andy Schlafly 20:53, 17 October 2009 (EDT)