Economics Homework Five Answers - Student Nine

Economics Homework #5 Mark B.

1. Efficiency is a term used for describing a way of working where you get the maximum done in the minimum time.

Fantastic, will probably use as a model. Extremely concise and yet complete.

2. A and B are substitutes, and X and Y are complements.

Correct.

3. It will cost me $20.

Correct again!

4. Steaks are normal goods; hamburgers are inferior goods.

Right!

5. The basic assumption is that there are transaction costs involved in all economic activity. As you reduce transaction costs, economic efficiency increases.

Right, but misses the point about how the free market leads to people negotiating the best uses of property and rights ... and finding the better mousetrap. So your answer is good, but not quite complete. (Minus 1).

6. He will begin to make more of the product, because when marginal revenue exceeds marginal cost a producer will make more money from each product he sells. For instance, if a store's hourly expenses are $200 and it sells 201 goods for $1.00 each, then he would want to stay open.

Excellent.

7. It does not say anything about the desirability of government regulations, but one effect of them is that they decrease overall wealth.

Right ... because government regulations increase transaction costs. (Minus 1).

8. The more substitutes that there are for a good, the more elastic it is. This is because if the price rises a little, then more people will buy the substitutes, resulting in an decrease in demand.

Excellent! A perfect foray into the honors questions!

Very well done. 78/80. Congratulations!--Andy Schlafly 19:46, 17 October 2009 (EDT)