Changes

'''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.'''

Minimum waste, with maximum output.  If every one arrived at work on time, didn’t take smoking breaks and socialize, both the company and the employees would be more successful.

Minimum waste, with maximum output.  If every one arrived at work on time, didn’t take smoking breaks and socialize, both the company and the employees would be more successful.

'''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 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?'''

A + B are substitutes

A + B are substitutes

X + Y are complements   

X + Y are complements   

'''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 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?'''

$20  

$20  

'''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. 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?'''

Stakes are a normal good and fast food ham burgers are inferior.

Stakes are a normal good and fast food ham burgers are inferior.

'''5. What is the basic assumption of the Coase theorem, and why is that assumption so important to the result of the theorem?'''

'''5. What is the basic assumption of the Coase theorem, and why is that assumption so important to the result of the theorem?'''

Without transaction costs to gum the works, there would always be successful economic results between people, because "if there is a will there is a way" in the free market.  It important because it operates without regard to a person’s wealth, race, sex or nationality.

Without transaction costs to gum the works, there would always be successful economic results between people, because "if there is a will there is a way" in the free market.  It important because it operates without regard to a person’s wealth, race, sex or nationality.

'''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.'''

He keeps doing what ever he is doing, because he is making money.   

He keeps doing what ever he is doing, because he is making money.   

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

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

It says that they are the gum that messes up the economic machine.  The less, the better.

It says that they are the gum that messes up the economic machine.  The less, the better.

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