A Firm Has Invented a New Beverage Called Slops

question 73

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)The firm will produce 10 units of Slops.
• C)From the point of view of social efficiency, it is best that no Slops be produced.
• D)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.
• E)None of the above.

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Definitions:

Outsourcing

The practice of hiring external firms to perform tasks, handle operations, or provide services that are either difficult to manage or outside the company's expertise.

Reengineering

The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical measures of performance.

Statistical Method

A technique or procedure applied to numerical data for the purpose of analyzing, interpreting, or explaining statistical phenomena.

Employee Leasing

A practice where businesses hire their workers through a professional employer organization, which then handles HR, payroll, and other administrative tasks.