A Firm Has Invented a New Beverage Called Slops

question 34

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)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.
• C)From the point of view of social efficiency, it is best that no Slops be produced.
• D)The firm will produce 18 units of Slops.
• E)None of the above.

---

Definitions:

Indolamine

A type of neurotransmitter which includes serotonin, involved in the regulation of mood and behavior.

DNA

Deoxyribonucleic acid, a molecule that carries the genetic instructions used in the growth, development, functioning, and reproduction of all known living organisms and many viruses.

Human Genome

The complete set of nucleic acid sequence for humans, encoded as DNA within the 23 chromosome pairs in cell nuclei and in a small DNA molecule found within individual mitochondria.

Genes

Sequences of DNA that determine characteristics and are inherited from one's parents.