Economics Homework Five Answers - Student Ten

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

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?

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?

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?

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

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

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