Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Question
Chapter 11, Problem 2DQ
(a)
To determine
The nature of inefficiency in the given case of tea and coffee.
(b)
To determine
The nature of inefficiency in the given case of skilled machines and unskilled labors.
(c)
To determine
The nature of inefficiency in the given case of trucks and cars.
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Inferior goods are affordable substitutes for more expensive goods. Which of the following is an example of someone purchasing an inferior good?
Tom saved his money for an entire year so that he could buy the nicest car on the lot.
Susan decided to buy her favorite pasta, rather than the store-brand pasta that she usually purchases.
Sam had to stay within his budget, so he decided to buy generic toaster pastries instead of his favorite brand-name pastries.
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Define, explain and provide an example from your life for each of the following concepts (if
you prefer, you can draw graphs to illustrate your explanations):
a) Opportunity cost
b) Marginal benefit, marginal cost
c) The law of demand, the law of supply
d) The law of diminishing marginal utility
e) Deadweight loss
Sven makes rocking chairs for a cost of $75 each, and he sells the rocking chairs for a market price of $130
each. Deidre is willing to pay $200 for a rocking chair. However, the government believes that rocking chair
manufacturers should receive more money, and set the lowest legal price rocking chairs can be sold for at $250.
At the market price, Sven is willing to sell a rocking chair to Deidre, and Deidre is willing to buy a rocking chair
from Sven. Unfortunately, with the new legal minimum, Sven and Deidre cannot trade with one another, and
miss out on additional gains from trade.
Which of the effects of a price control best fits the scenario above?
O Deadweight Loss
Reduction in Quality
O Misallocation of Resources
Wasteful Increase in Quality
Chapter 11 Solutions
Economics: Principles & Policy
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Similar questions
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