MACROECONOMICS (LL)
21st Edition
ISBN: 9781260186949
Author: McConnell
Publisher: MCG
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Chapter 5, Problem 3RQ
To determine
Example of rent seeking.
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A manufacturer of microwaves has discovered that male shoppers, on average, have lower values for microwave ovens than female shoppers. Additionally, male shoppers attribute almost no extra value to an auto-defrost feature, while female shoppers, on average, value the auto-defrost feature. The manufacturer has determined that men value a simple microwave at $70 and one with auto- defrost at $80, while women value a simple microwave at $80 and one with auto-defrost at $150. If there is an equal number of men and women, what pricing strategy will yield the greatest revenue?
Suppose Simon Petrikov decides to stop trying to capture princesses. This new policy will put Jake and Finn – who rescue princesses for a living – out of business, costing them a combined $100. However, Lumpy Space Princess and Princess Bubblegum each gain $75 from this new turn of events, as they save money in precautions. Simon’s new policy is:
A.
Pareto optimal
B.
Welfare-reducing
C.
Potentially Pareto improving/Kaldor-Hicks efficient
D.
Only Potentially Pareto improving/Kaldor-Hicks efficient if LSP and Bubblegum give Jake and Finn at least $100
Kyle receives two free passes to the symphony as a bonus at work. He has never been to the symphony before and would probably not buy such tickets for their face value of $120. Kyle decides to use the tickets rather than sell them at face value. This type of behavior is:
Question 49 options:
a
irrational, since Kyle would not pay $120 for the tickets, yet gives up $120 by not selling them.
b
rational, since Kyle can check out the symphony and not have to pay for it himself.
c
irrational, since Kyle ignores his sunk cost of $120.
d
rational, since Kyle does not ignore his sunk cost of $120.
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