A Firm Has Invented a New Beverage Called Slops

question 54

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 = 14 -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 $54.Since the inventor has a patent on Slops, it can be a monopolist in this new industry.

• A)The firm will produce 7 units of Slops.
• B)A Pareto improvement could be achieved by having the government pay the firm a subsidy of $59 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 14 units of Slops.
• E)None of the above.

---

Definitions:

Properly Payable Rule

A principle in banking law where banks are only obligated to pay checks that are correctly drawn up and meet all legal requirements.

Electronic Fund Transfer

The electronic transfer of money between accounts, facilitated by a network of computers, allowing for quick and secure transactions without the need for physical exchange of cash or checks.

Wire Transfer

An electronic method of transferring funds directly from one person or entity's bank account to another's across financial institutions.

Integrative Negotiation

A negotiation approach in which the parties’ goals are not seen as mutually exclusive, but the focus is on both sides achieving their objectives.