A Firm Has Invented a New Beverage Called Slops

question 15

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 = 10 - 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 $30. Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

• A) The firm will produce 5 units of Slops.
• B) A Pareto improvement could be achieved by having the government pay the firm a subsidy of $35 and insisting that the firm offer Slops at zero price.
• C) From the point of view of social efficiency, it is best that no Slops be produced.
• D) The firm will produce 10 units of Slops.
• E) None of the above.

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Definitions:

Routine Problems

Standard or frequently encountered issues that can usually be addressed through known solutions or procedures.

Unique Problems

Distinctive or specific issues that are not common or general, often requiring tailored solutions.

Autocratic Leadership

Management approach whereby leaders make decisions on their own without consulting employees.

Two-way Communication

The process of exchanging information where both parties are able to send and receive messages, promoting interaction and feedback.