Microeconomics (2nd Edition) (Pearson Series in Economics)
2nd Edition
ISBN: 9780134492049
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 7, Problem 5P
To determine
The Pareto efficiency of the preferences of Sara and Jim, when their preferences are given.
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Students have asked these similar questions
Peter, John, and James are discussing how to share three chocolate bars and three bags of chips. For each of the following statements, state whether the statement is TRUE or FALSE and provide a short explanation for your choice.
a) It is always Paretig efficient for Peter, John, and James to have one chocolate bar and one bag of chips each.
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
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?
A)Deadweight Loss
B) Reduction in Quality
C) misallocation of resources
D)wasteful increase in Quanity
Chapter 7 Solutions
Microeconomics (2nd Edition) (Pearson Series in Economics)
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Similar questions
- What might a producer do if consumers stopped purchasing their goods? Provide an example of this occurrencearrow_forwardYou may have observed that items such as different brands of aspirin, tomato sauce, or gasoline are typically priced the same as each other. This is particularly true when consumers can find these goods in close proximity to each other. For example, prices are often the same at gas stations that are on opposite sides of the street. Prices are also generally the same for products next to each other on the same grocery store shelf. Choose the correct fill in the blank. The aforementioned examples are goods that are likely to be substitutes or complements You would expect the value of the cross-price elasticity to be insignificant, small, or large because the opportunity cost of getting information on price is low.arrow_forwardDavid-Michael is conducting an experiment, charging different prices for the same products at different stores and measuring sales. With this information, he will construct a demand curve. How can David-Michael use this information?arrow_forward
- Would you rather have efficiency or variety? That is, one opportunity cost of the variety of products we have is that each product costs more per unit than if there were only one kind of product of a given type, like shoes. Perhaps a better question is, “What is the right amount of variety? Can there be too many varieties of shoes, for example?”arrow_forwardInferior 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. Jennifer earned a bonus at work, so she decided to go out to dinner at a fancy restaurant.arrow_forwardDiscuss cost-plus pricing model in a market economyarrow_forward
- A buffet restaurant charges $70.00 per person. Explain how this price was determined. How much would the customer (person) eat? Use an illustration in your responsearrow_forwarduppose two individuals (Cindy and Elicia) each have 12 hours of labor to devote to producing either roti (X) or fry rice (Y). Cindy’s demand for X and Y is given by: XC = 6/PX and YC = 6/PY, whereas Elicia’s demands are given by, XE = 8/PX andYE = 4/PY. The individuals do not care whether they produce X or Y and the production function for each good is given by X = 3L; Y = 4L where L is the total labor devoted to production of each good. The equation for the frontier is given by X/3 + Y/4 = 24. Which is the price ratio, Px/Py?arrow_forwardImagine that you are buying Lego bricks. The number of bricks you are willing to buy is determined by the market price of bricks. Your willingness to buy is defined by the following: You are willing to buy 1 brick if the price is at or below $30 You are willing to buy 2 bricks if the price is at or below $25 You are willing to buy 3 bricks if the price is at or below $20 You are willing to buy 4 bricks if the price is at or below $15 What is your consumer surplus if the market price of bricks is $23? Assume that there are enough sellers available to sell as many as you want to buy at that price. Enter the number below. Do not include the “$” sign.arrow_forward
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