A Firm Has Invented a New Beverage Called Slops

question 20

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.

---

Definitions:

Seasonal Variation

Fluctuations in data or economic activity that occur regularly based on the season or time of year.

Time Series

It is a sequence of data points indexed in time order, often used to analyze and predict future events based on past trends.

Moving Average

A calculation to analyze data points by creating averages of different subsets of the complete data set.

Cyclical Movement

Fluctuations in business activity experienced over time, usually tied to economic cycles.