Using examples, explain the characteristics of public goods and merit goods.
The characteristics of public goods are that it's both nonexcludable and nonrivalrous. In economics, It is a good that can consume by everyone and nobody can be excluded from using it. The consumption by a person does not reduce it's availability to another individual. for ex: defense, street lights etc. Merit goods are those goods or services that have positive side effects and is provided as the government feels that people will under-consume. It is ought to be subsidized to encourage the consumption of such goods. The lack of information about the benefits of merit goods to the people leads to underconsumption. for ex: health care, education etc.
Crystal bought goods on credit from Priscila. The goods had a list price of $1000, but Priscila allowed Crystal trade discount of 10% and cash discount of 4%. How much did Crystal have to pay Priscila?
The trade discount must be deducted first from the list price. So, that would be 1000-(10/100*1000)=$900 Then, deduct the cash discount from the $900 which is 900-(4/100*900)=$ 864 Crystal has to pay $864 to Priscila.
Timothy runs his cloth manufacturing company. His partner, Jim suggests that he expands their scale of operations to an optimum level as he says it would help lower their cost of production and possibly improve profitability. Which term would be used to suggest Jim's theory and how could it help lower cost of production?
The term that could be used to describe Jim's advice is "Economies of Scale". Economies of scale could be defined as the cost advantage that arises with the increased output of a product. There are different types of economies of scale that can be experienced by a business like managerial, technical, marketing, purchasing and financial economies of scale. If Timothy decides to expand their scale of operations it would require for them to produce higher volumes of clothing. In order to increase production, Timothy would require purchasing large quantities of raw materials. Ordering raw materials for production in bulk quantities could fetch them a discount from the suppliers which would enable them to lower their average costs and lower cost of production. The business can benefit from purchasing economies Timothy could increase their scale of operations by adopting advanced technology into their products which could increase the output of clothing and lower average costs by improving efficiency and lowering wastage. They can benefit from technical economies this way. Managerial expertise could help improve efficiency and increase production of clothing which would help keep their average costs low and competitive. Managerial economies can also be achieved which could help lower cost of production for Timothy's business and help improve profitability. Jim's advice could possibly better the performance of their business by promoting efficiency and increasing production which could lower average costs. This could maximize the profits for their business by minimizing average costs.