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.

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Definitions:

Carl Jung

A Swiss psychiatrist and psychoanalyst who founded analytical psychology, emphasizing the importance of the individual psyche and the personal quest for wholeness.

Gender-schema Theory

A theory that explains how individuals become gendered in society and how sex-linked characteristics are maintained and transmitted to other members of a culture.

Social Cognitive Theory

A learning and social behavior theory suggesting that people can learn new actions by watching and mimicking others.

Behaviorism

A psychological theory focusing on observable behaviors and the ways they're learned.