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True/False/Uncertain.
Evaluate whether the following statements are true, false or uncertain. Make sure to explain your reasoning
a. In the presence of a binding price floor, a good will not be efficiently allocated among consumers.
b. Equilibrium in a monopolized market is efficient because the monopolist always produces where marginal cost equals marginal revenue
c. The opportunity cost of a free H1N1 vaccination is zero.
d. A rise in the price of one good will lead you to consume more of all other goods.
a. In the presence of a binding price floor, a good will not be efficiently allocated among consumers.
The above statement is true
The binding floor price will be above the equilibrium level and hence will create excess supply at that price level. Therefore, the good will not be efficiently allocated among consumers.
b. Equilibrium in a monopolized market is efficient because the monopolist always produces where marginal cost equals marginal revenue
The above statement is false
It is true that the monopolist operates at a level where it?s MR = MC, but it is not the level where the cost of production is minimum. So, it does not attain efficiency.
c. The opportunity cost of a free H1N1 vaccination is zero.
The above statement is true
The reason is the lack of any other alternative. So, there will be zero opportunity cost as there is no alternative to be forgone.
d. A rise in the price of one good will lead you to consume more of all other goods.
The above statement is false
Whether the consumption of other goods rises or falls depends on the nature of the given good. If it is a necessity, then it has to be consumed. If it has numerous substitutes, then only we consume more of the other goods. And, if it is a complementary good, then the consumption of its complement will decrease too. So, in general, the given statement is false.