Explain why in the case of economies of scope the production possibility frontier is bowed outward
What will be an ideal response?
With economies of scope a firm uses less resources if it produces 2 goods jointly instead of producing the 2 goods in two firms separately. This means that the firm can produce more of the 2 goods when the goods are produced jointly. Hence, the PPF is bowed outward.
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Keeping in mind the Coase theorem, in the figure above, if the pesticide factories own the lake, the market does what?
A) overproduces 120 tons of pesticide B) underproduces 120 tons of pesticide C) overproduces 60 tons of pesticide D) produces the efficient quantity of pesticide
?Maryann and Don want to open their own deli. To do so, Maryann must give up her job, where she earns $20,000 per year, and Don must give up his part-time job, where he earns $10,000 per year. They must liquidate their money market fund, which earns $1,000 interest annually. The rent on the building is $10,000 per year, and the expenses of such necessities as utilities, corned beef, and pickles are $35,000 annually. The minimum amount of revenue per year that would make it worthwhile, financially, for Maryann and Don to run the deli is _____.
a. ?$10,000 b. ?$31,000 c. ?$35,000 d. ?$45,000 e. ?$76,000