1. Ecconomic efficiency is getting the most productivity out of something. It is using the most of your time. An example, using cooking terms, is when you have a chicken that you have purchased. You can cook it and eat the meat and then use the bones and leftover to make a chicken stock. You are getting the full use out of the chicken.
- Correct. I particularly like "It is using the most of your time." Please see my comment at the end about spelling.
2. If the cross elasticity of goods A & B is 3.8, and goods X & Y is -2.7 we can conclude that goods A & B are substitutes since they are a positive number while goods X & Y are complements since they are a negative number.
3. The marginal cost to make another unit would be $20.
4. In this scenario, the steaks are normal goods and the hamburger is an inferior good.
- Right again!
5. The basic assumption of the Coarse Theorem is that in the absence of transaction cost, an effective or optimal ecconomic result occurs regardless of who owns the property rights. This is important because the more transaction cost that we put into the system, the system becomes all that more inefficient.
- Very close, but note that the transaction costs interfere with the bargaining for the property rights so that the most efficient use is obtained. It is not just due to the inefficiencies of the transaction costs, but also due to their interference with the freedom to bargain and negotiate and find etc. (Minus 1).
6. A owner sells as many goods as he can until marginal revenue decreases to the level of his cost. For example when a restaurant owner needs to make a decision as to whether or not he will stay open later, he must decide if it is pay the extra employees, energy cost for the few customers he may get versus closing at an earlier time.
7. It says that government regulations transaction cost hurt overall efficiency and properity. Therefore government regulation is undesirable.
- Very good. Note: "prosperity", not "properity"
- Terrific answers, but the spelling could improve. Shanna, I think I corrected this on your last paper also: the correct spelling is "economic", not "ecconomic". Score: 69/70. Congratulations!--Andy Schlafly 21:17, 17 October 2009 (EDT)