Economics Homework Ten Answers - Student Eleven
1. An externality is that not all buyers and consumers will bear all the costs and reap all the benefits from a transaction. An outside party could be affected by the externality whether it is positive or negative. An example of this would be pollution.
2. Marginal Revenue must equal zero for two reasons. Reason number one: If you were to produce one more unit, then you would increase the total revenue. This is not possible because total revenue is maximized. Reason number two: If you were to reduce one unit, then you would increase the total revenue. This is not possible either because the total revenue is already maximized. Therefore, the only option left to satisfy the equation would be zero.
- OK, but the answer should mention that "reason number one" is if marginal revenue were greater than zero, and "reason number two" is if marginal revenue were less than zero. Neither works, so marginal revenue must equal zero.
4. Education is an example of a positive externality. Foul language is an example of a negative externality.
5. More than likely, a private firm will not provide a public good because they are regulated through the government. A private firm can regulate the price of their good and make a profit off it. However, a public good, such as a park, cannot make a profit for the firm to grow.
- Could explain a bit better. It's not the regulation that is the real problem here, but the inability to exclude people who don't pay for the good which causes the problem. (Minus 1)
6. Goods A and B are substitutes. They are substitutes because as the price of one good goes up, the other good, which is at a lower cost, will be purchased in place of it.
Goods C and D are complements. They are complements because the negative elasticity shows that they goods are bought or used together. The increase in demand of good C will, also, increase the demand of good D.
7. 1.Land- for building space
2. Capital- money 3. Labor- workers 4. Entrepreneurship- creativity of the owners and managers
- 59/60. Well done! Congratulations and have a happy and blessed Thanksgiving.--Andy Schlafly 23:12, 25 November 2009 (EST)