Changes

==Assignment==

==Assignment==

Read and, if necessary, reread the above lecture.  Then answer five out of the following six questions, and then take the online quiz:

Read and, if necessary, reread the above lecture.  Then answer the following six questions:

1. Define, in your own words, economic “efficiency”.  Use it in an example sentence.

1. Suppose the cross elasticity of demand for goods A and B is +3.8, and for goods X and Y is -2.7.  What can you conclude about the relationship of the goods A and B, and of X and Y?

2. Suppose the cross elasticity of demand for goods A and B is +3.8, and for goods X and Y is -2.7.  What can you conclude about the relationship of the goods A and B, and of X and Y?

2. Suppose it costs you $500 to make your first 5 units, then $200 to make your next 5 units, and then $100 to make your next 5 units. Costs do not decrease further for you.  What is the marginal cost for you to make another unit?

3.  Suppose it costs you $500 to make your first 5 units, then $200 to make your next 5 units, and then $100 to make your next 5 units.  Costs do not decrease further for you.  What is the marginal cost for you to make another unit?

3.  Suppose your annual income increases from $20,000 to $25,000.  Suppose your demand for steak increases by 10% and your demand for fast food hamburgers decreases by 5%.  Which type of goods are steak, and which type are hamburgers?

4.  Suppose your annual income increases from $20,000 to $25,000. Suppose your demand for steak increases by 10% and your demand for fast food hamburgers decreases by 5%. Which type of goods are steak, and which type are hamburgers?

4.  What does an owner do when his marginal revenue exceeds his marginal cost? Explain.

5.  What does an owner do when his marginal revenue exceeds his marginal cost? Explain.

5.  What does the Coase theorem say about the desirability, and the effect, of government regulations that increase transaction costs?

6.  What does the Coase theorem say about the desirability, and the effect, of government regulations that increase transaction costs?

6.  Take the online 10-question quiz about basic concepts covered in our course so far.  If you have a smart phone such as an iPhone or Android, this quiz should work on that too.  Report your score here (e.g., 8 out of 10).

===Honors===

===Honors===

No essay this week.  Instead, complete four out of the following five (#8-12) questions, with an optional question for extra credit at the end:

No essay this week.  Instead, complete four out of the following five (#8-12) short-answer questions, with an optional question for extra credit at the end:

8.  The greater the number of substitutes for a good, is it more or less price elastic?  Explain briefly.

8.  The greater the number of substitutes for a good, is it more or less price elastic?  Explain briefly.

12.  Suppose french fries cost $1 and ketchup 10 cents.  When the price of ketchup goes up to 20 cents, the quantity demanded for french fries falls by 10%.  What is the cross elasticity of demand for french fries with respect to ketchup?  Show your work and state whether these goods are complements or substitutes.

12.  Suppose french fries cost $1 and ketchup 10 cents.  When the price of ketchup goes up to 20 cents, the quantity demanded for french fries falls by 10%.  What is the cross elasticity of demand for french fries with respect to ketchup?  Show your work and state whether these goods are complements or substitutes.

13. (Optional) Can you think of any consequence of the Coase theorem that is not mentioned in this Lecture?

 

13.  Can you think of any consequence of the Coase theorem that is not mentioned in this Lecture?

== References ==

== References ==