Which of the following would NOT be considered a fixed cost of production?
A) wages paid to labor
B) the opportunity cost of capital
C) interest payments on a loan
D) insurance payments on plant and equipment
Answer: A
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In theory the market's willingness-to-pay (WTP) should be equal to the market's willingness-to-accept (WTA). In other words, if you are willing-to-pay $1 for an incremental improvement in tap water quality, then you should be willing-to-accept $1 for an incremental decrease in tap water quality. In practice, however, the two are often estimated to be unequal. Which of the following helps to explain this disparity?
a. the WTA/WTP disparity b. the endowment effect c. benefit transfer d. value of statistical life e. cost-benefit analysis f. expected value g. risk and uncertainty h. None of the above.
The increase in the price of sugar created by the tariff will lead domestic production to increase by ________ tons per year, compared to when the economy is open without the tariff.
A. 40 B. 10 C. 30 D. 20