A Firm Has Invented a New Beverage Called Slops

question 33

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 = 16 - 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 $69.Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

• A)The firm will produce 16 units of Slops.
• B)A Pareto improvement could be achieved by having the government pay the firm a subsidy of $74 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 8 units of Slops.
• E)None of the above.

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Definitions:

Employees As Wages

Compensation in the form of money paid to employees for their labor or services.

Independent Internal Verification

An audit process carried out by employees within the company who are not directly involved in the operations being examined, to ensure accuracy and compliance.

Internal Auditors

Professionals who perform audits within an organization to assess the effectiveness of its risk management, control, and governance processes.

Employee Collusion

When two or more employees work together secretly and deceitfully to commit fraud or theft against their employer, often undermining the employer's interests.