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Author Question: Suppose a Chinese restaurant provides free tea and fortune cookies to its customers. The restaurant ... (Read 111 times)

burchfield96

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on: Jun 29, 2018
Suppose a Chinese restaurant provides free tea and fortune cookies to its customers. The restaurant is clearly
 
  A) generating a negative externality.
  B) generating a positive externality.
  C) selling food below cost.
  D) attempting to increase its total profit.
  E) doing none of the above.

Question 2

Differentiate between the coordination problem and the incentive problem.
 
  What will be an ideal response?


jointhecircus

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Reply #1 on: Jun 29, 2018
Answer to Question 1

D

Answer to Question 2

The coordination problem refers to the problem of bringing economic agents together to trade, whereas the incentive problem refers to the problem of aligning the interests of economic agents. These problems can occur in a command economy.


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