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| | 1. Define, in your own words, economic “efficiency”. Use it in an example sentence. | | 1. Define, in your own words, economic “efficiency”. Use it in an example sentence. |
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| − | 2. | + | 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? |
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| | 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 more units? | | 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 more units? |
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| − | 4. | + | 4. Suppose your annual income increases from $20,000 to $25,000. Mark's income has increases from $20,000 to $25,000. Your demand for steak increases by 10% and your demand for fast food hamburgers decreases by 5%. Which types of goods steak and which type are hamburgers? |
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| − | 5. Coase theorem and regulations. | + | 5. What is the basic assumption of the Coase theorem, and why is that assumption so important to the result of the theorem? |
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| | 6. What does an owner do when his marginal revenue exceeds his marginal cost? Explain. | | 6. What does an owner do when his marginal revenue exceeds his marginal cost? Explain. |
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| − | 7. Coase theorem question. | + | 7. What does the Coase theorem say about the desirability, and the effect, of government regulations that increase transaction costs? |
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| | ===Honors=== | | ===Honors=== |
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| | 11. Would government prefer taxing a good that is price elastic or price inelastic? Explain. | | 11. Would government prefer taxing a good that is price elastic or price inelastic? Explain. |
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| − | 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 make any assumptions you feel are necessary. | + | 12. Calculate the income elasticities for the two goods in question 4. |
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| | + | 13. 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 make any assumptions you feel are necessary. |
| | [[Category:Economics lectures]] | | [[Category:Economics lectures]] |
| | {{DEFAULTSORT: Economics Lecture 05}} | | {{DEFAULTSORT: Economics Lecture 05}} |