What relationship exists between marginal revenue and the elasticity of demand? Use
this relationship to explain how a monopoly can increase its profit if demand is
inelastic.
If the Open Range Field is currently a common property and the government decides to
charge an entrance fee, this would result in an optimal level of activity in the Open
Range Field.
The supply curve for a commodity will shift to the right when the costs of production
rise.
Treasury bills are sold at face value and buyers received annual interest payments from
the government.
The production function describes how much output a firm can generate for various
cost levels.
If the marginal product of labor is currently 40 units per hour and the marginal product
of capital is currently 20 units per hour, then workers must be getting paid twice as
much as capital per hour.
Pigovian analysis indicates that a subsidy should be awarded when economic activity
creates social benefits.
A drafted army can be unnecessarily costly in two ways: it can be the wrong size or it
can consist of the wrong people.
In deriving the marginal product of labor, we consider the increase in output of an
additional worker using additional capital.
Coase’s analysis shows that, when there are no transactions costs, private costs and
social costs must be equal.
If there are only two activities on which a person can work, and there are two people to
do the work, then it is impossible for one person to have a comparative advantage in
both activities.
To achieve economic efficiency when transactions costs are present, the property right
is awarded to the party with the least-cost solution to the externality problem.
Distributing goods equally among consumers would be not only fair but efficient.
A demand curve is drawn downward sloping to show that price and quantity demanded
will move in opposite directions as long as other relevant factors remain unchanged.
To be effective, a price ceiling needs only to be enforced.
Workers will receive higher wages when an employer faces an upward-sloping supply
curve for labor.