AllieT.
1. An externality is that not all buyers and consumers will bear all the costs and reap all the benefits from a transaction. An outside party could be affected by the externality whether it is positive or negative. An example of this would be pollution.
2. Marginal Revenue must equal zero for two reasons. Reason number one: If you were to produce one more unit, then you would increase the total revenue. This is not possible because total revenue is maximized. Reason number two: If you were to reduce one unit, then you would increase the total revenue. This is not possible either because the total revenue is already maximized. Therefore, the only option left to satisfy the equation would be zero.
4. Education is an example of a positive externality. Foul language is an example of a negative externality.
5. More than likely, a private firm will not provide a public good because they are regulated through the government. A private firm can regulate the price of their good and make a profit off it. However, a public good, such as a park, cannot make a profit for the firm to grow.
6. Goods A and B are substitutes. They are substitutes because as the price of one good goes up, the other good, which is at a lower cost, will be purchased in place of it.
Goods C and D are complements. They are complements because the negative elasticity shows that they goods are bought or used together. The increase in demand of good C will, also, increase the demand of good D.
7. 1.Land- for building space
2. Capital- money 3. Labor- workers 4. Entrepreneurship- creativity of the owners and managers
Categories: [Economics Homework Ten Answers]