A Firm Has Invented a New Beverage Called Slops

question 1

Multiple Choice

A firm has invented a new beverage called Slops. It doesn't taste very good, but it gives people a craving for Lawrence Welk's music and Professor Johnson's jokes. Some people are willing to pay money for this effect, so the demand for Slops is given by the equation q = 18 - p. Slops can be made at zero marginal cost from old-fashioned macroeconomics books dissolved in bathwater. But before any Slops can be produced, the firm must undertake a fixed cost of $86. Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

• A) The firm will produce 9 units of Slops.
• B) From the point of view of social efficiency, it is best that no Slops be produced.
• C) A Pareto improvement could be achieved by having the government pay the firm a subsidy of $91 and insisting that the firm offer Slops at zero price.
• D) The firm will produce 18 units of Slops.
• E) None of the above.

Recognizing the legal documentation that governs the management and operational policies of a corporation, like bylaws and corporate charters.

Understanding the establishment of professional corporations by licensed professionals and distinguishing them from other business entities.

Understand the concepts of utility maximization and optimal market basket selection.

Grasp the principle of revealed preference and its application in consumer theory.

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Definitions:

Price Cut

A reduction in the selling price of goods or services, usually aimed at increasing demand or facing competition.

Elastic Demand

An instance where the demand for a product exhibits substantial sensitivity to adjustments in its pricing.

Price Rise

An increase in the cost of goods or services, often due to factors such as inflation, demand surges, or production costs.

Concept of Elasticity

An economic measure of the sensitivity of an economic variable, such as demand or supply, in response to a change in another variable, such as price.