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.

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Definitions:

Add

The mathematical operation of combining two or more quantities to achieve a sum or total.

DS

An acronym commonly used for Decision Support systems, which assist in making decisions, often through the analysis of data.

Add

To combine one number or quantity with another to obtain a total.

Conj

Short for conjunction, a part of speech that connects words, sentences, phrases, or clauses.