Your Economics Professor Has Probably Told You That There Will

question 28

Essay

Your economics professor has probably told you that there will be a final exam in your economics class.The main reason for this final exam is to make sure that everyone has an incentive to work hard, come to class and read the textbook.When the day of the examination comes, however, it seems as if everyone would be better off if the professor cancelled the exam.You wouldn't have to take the exam, and your professor wouldn't have to mark it.Do you think your economics professor is likely to cancel the exam? Why not? What economic idea does this illustrate?

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Definitions:

Social Cost

The total cost to society of an activity or decision, including both direct costs borne by the individual and indirect costs absorbed by the broader community.

Monopoly Price

The price set by a monopolist, which is typically higher than in competitive markets because the monopolist maximizes profit by producing where marginal revenue equals marginal cost.

Free

Without cost or payment, often referring to goods, services, or activities that can be enjoyed without financial compensation.

Subscribers

Individuals or entities that pay a subscription fee to receive or access a product or service.