Suppose a seller's opportunity cost matches a buyer's valuation of the product. Assuming a two-person economy, which of the following statements will be true?
a. The transaction will benefit the buyer, while the seller will neither gain nor lose from it.
b. The economic value created by this exchange will be zero.
c. Both parties will be worse-off after the transaction.
d. The seller will be worse-off than the buyer after the transaction.
QUESTION 2Assume that one laborer produces 6 units of output, two laborers produce 14 units, three produce 20 units, and four produce 24 units. If the cost is 20 per unit of labor and fixed costs are 100, what is the average total cost of producing 14 units of output?
a. 50
b. 20
c. 10
d. 100
e. 40
QUESTION 3Which market structure is characterized by many sellers, easy entry, and homogeneous products
a. perfect competition
b. monopolistic competition
c. oligopoly
d. monopoly
QUESTION 4Common ownership of resources:
a. is a system by which the government allocates the rights to harvest renewable resources.
b. may fail to ensure that harvesting of renewable resources does not exceed the maximum sustainable yield.
c. is an environmentally effective method of internalizing an externality problem in renewable resource conservation.
d. efficiently controls the harvest of renewable resources.
e. usually helps in preventing market failures.
QUESTION 5Joanne rents out her apartment in Seattle to Alice as she is moving to Dallas for the next three years. Which of the following statements must be true?
a. Alice's valuation of the apartment is higher than Joanne's opportunity cost of renting it.
b. Joanne's valuation of the apartment is higher than Alice's.
c. This transaction creates no economic value for Alice.
d. Alice's valuation of the apartment is lower than Joanne's opportunity cost of renting it.
QUESTION 6Assume that for 20 bicycles, the total fixed cost is 100 and the total variable cost is 300 . Then the average fixed cost and the average variable cost are:
a. 5 and 10 respectively.
b. 5 and 15 respectively.
c. 10 and 15 respectively.
d. 15 and 10 respectively.
e. 10 and 5 respectively.
QUESTION 7Which of the following best resembles a perfectly competitive market?
a. a stock market
b. the book publishing industry
c. the steel industry
d. the used car industry
QUESTION 8Lack of well-defined ____ may cause market failures.
a. fiscal policies
b. public transportation systems
c. private property rights
d. interest rates
e. monetary policies
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