Economics Homework Five Answers - Student Fourteen

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1.) Efficiency is when minimal effort > minimal return. In other words, you always receive the most from your effort.

2.) A and B are compliments because their cross elasticity is negative. X and Y are substitutes because their cross elasticity is positive.

3.) The marginal cost will be 20$/ unit.

4.) The steak would be a normal good because demand increases as income increases. However, the fast-food hamburgers would be an inferior good because as income increases, demand for that good decreases.

5.) The basic theory of the Coase theorem is that without transactional costs, and efficient or optimal economic results occurs regardless of who owns the property rights.

6.) When an owner’s marginal revenue exceeds his marginal cost, he will keep his store or business open until his marginal revenue equals his marginal cost, at which point no more profit will be earned, and the store will close.

7.) The Coase theorem states that any governmental “assistance” that requires increases in transaction costs is simply bad. When Coase was asked “ What is an example of a bad regulation?” He replied, “ I can’t remember one that’s good.”