Economics Homework Ten Answers - Student Three
1. In your own words, try to give a better definition of "externalities" than provided by this Lecture.
Externalities are the results of a good or service that can have benefits or drawbacks for a person not involved with the transaction.
2. Explain why marginal revenue must be zero when total revenue is maximized.
Because when the total revenue is maximized, it is as high as it can go.
- Right, but some more explanation that addresses marginal revenue would be helpful. (Minus 1)
4. Give an example of a positive externality, and an example of a negative externality. The example does not have to be limited to a business.
If your next-door neighbor buys a plasma TV, and invites you over to watch a game, it is a positive externality. But, if your next door neighbor watches TV late at night on high volume, it can be annoying and is therefore a negative externality.
- Very good.
5. Explain why private firms in the free market are unlikely to try to provide public goods.
Private firms are unlikely to provide public goods, because they would be losing money. Public goods are available to everyone, and therefore aren't going to be in especially high demand.
6. Review question: the cross-elasticity of A with respect to B is positive, and C with respect to D is negative. What is the relationship (complement or substitute?) of goods A and B with each other, and C and D with each other? Explain.
Since A & B are positive, they would be substitutes, and since C & D are negative, they would be complements.
7. List the four factors of production and give a very brief explanation of each.
1. Land (to build on)
2. Capital (money for the company)
3. Labor (workers/employees)
4. Entrepreneurship (owners/managers being creative and making their business unique)
- Great work. 59/60.--Andy Schlafly 17:53, 25 November 2009 (EST)