Exam 2: Transactions and Institutions: the Building Blocks

When a hierarchy is in place where one person can give orders which others must follow, the price of the specific task the subordinates are being asked to perform goes undetermined.

Fab Tools Inc.can produce 150 widgets and 100 axes in a month.Another company AllMyTools Inc.can produce 80 widgets and 50 axes per month.Which of the following statements is true?

Suppose the seller's opportunity cost of producing shirts is $12 and the buyer's valuation is $22.If the seller gains $2 more than the buyer from this transaction, what is the price at which the good is exchanged between the two parties?

The higher the transaction cost of an exchange, the lower the probability of the exchange taking place between the buyer and the seller.

If the production of 2,000 cars and 500 tons of corn during a year is economically efficient for a country which produces only these two products, which of the following conclusions can be drawn?

What causes an economy to produce a level of output which lies inside the production set?

Suppose a buyer hires an interpreter who charges $5 to negotiate a deal with a seller.The buyer's valuation of the good is $50 and the seller's opportunity cost is $35.If the net benefit to the buyer is equal to the same received by the seller, what is the price agreed upon by the two parties?

The island nation of Sonorez produces 200 tons of wheat and 500 tons of corn.Munisia, its neighboring country, produces 400 tons of wheat and corn each.Sonorez would like to consume another 80 tons of wheat and is willing to give up a 100 tons of corn for it.Munisia on the other hand would like an extra 50 tons of corn and is willing to give up 100 tons of wheat.Which of the following conclusions can be drawn from this?

What is a production set?

The total cost of purchasing a car is:

The function of economic institutions is to:

Transaction costs increase the economic value of an exchange.

Laura's team can complete 15 reports and 5 presentations in a day.Albert can motivate his team to complete 12 reports in a day with 10 presentations.Suppose the boss needs 30 reports with 20 presentations completed during a particular day.Assigning the extra presentations to Laura's team would:

_____ determine the efficient pattern of specialization in production.

In a two-person economy, Adam and Brandon both produce corn and cars.Adam's marginal cost of producing a car is 50 tons of corn, while Brandon's marginal cost is 70 tons of corn.In this economy, Brandon should produce cars and Adam should produce corn.

The laws of contracts and their enforceability in court determine the range of transactions that we will find it worthwhile to undertake.

Identify the correct statement form the following.

Specializing on the basis of marginal cost of production and trading allows both parties to consume more than their respective production sets would allow.

The economic value which can be created by a transaction between two people, Ed (seller) and Luis (buyer), is $50 as Ed's opportunity cost of selling is $135 and Luis' valuation of the good is $185.If each gains $25 from this transaction, which of the following conclusions can be drawn?

Joanne 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?