The price paid to a resource in totally fixed supply is called
a. economic rent
b. economic profit
c. wages
d. interest
e. opportunity cost
QUESTION 2A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. It would cost the factory 5 million to move; it would cost 1 million for the day care center to move. Sound insulation for the factory costs 1 million; insulation for the day care center costs 200,000 . The court determines that the day care center has the property right. What would be the optimal solution to this problem?
a. The factory should install sound insulation because that is cheaper than moving.
b. The factory should pay the day care center to move.
c. The factory should buy insulation for the day care center.
d. The day care center should buy its own insulation.
e. The day care center should move.
QUESTION 3A resource that earns only economic rent
a. cannot be employed in any other line of production, so its opportunity cost is zero
b. is rental payment for a resource that has already been paid for
c. is impossible because all resources have an opportunity cost associated with their use
d. is not fixed in quantity
e. has a perfectly elastic supply curve
QUESTION 4A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. What would be the optimal solution to this problem?
a. The factory should move.
b. The day care center should move.
c. The factory should install sound insulation.
d. The day care center should install sound insulation.
e. We cannot determine the solution without more information.
QUESTION 5Economic rent represents
a. a loss to society since resource owners do not earn it
b. the difference between marginal revenue product and marginal resource cost
c. a loss to resource owners who earn less than the market value of the resource
d. any resource earnings less than that resource's opportunity cost
e. any resource earnings greater than that resource's opportunity cost
QUESTION 6The Coase theorem argues that the assignment of property rights will generate an efficient solution to the problem of
a. positive externalities as long as bargaining costs are small
b. negative externalities as long as bargaining costs are small
c. negative externalities as long as bargaining costs are great
d. any type of market failure
e. any type of market failure that involves high transaction costs
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