Because of Price Controls in the Former Soviet Union, People

question 116

Multiple Choice

Because of price controls in the former Soviet Union, people often waited in long lines for food and other necessities. Modern economic theory would indicate that, relative to price rationing, waiting in line is

• A) just as efficient.
• B) less efficient because the time spent waiting in line imposes an opportunity cost on the buyer that does not generate revenue for the seller.
• C) more efficient since waiting in line reduces the transaction costs of purchasing goods.
• D) more efficient since waiting in line reduces the cost of the goods to the consumer.

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Definitions:

Marginal Revenue (MR)

Marginal Revenue is the additional income that is obtained from selling one more unit of a good or service.

Pure Monopolist

A market structure wherein a single company or entity has exclusive control over the production and sale of a particular product or service, with no close substitutes.

Marginal Revenue

The additional revenue that a company receives from selling one more unit of a product.

Incremental Sales

The increase in sales generated by a specific action or event, beyond what would normally have been expected.