Tilly 8 Quiz Assumptions and Realities

Assumption 1

No market power.

Assumption 2

No economies of scale.

Assumption 3

Perfect information about the present.

Assumption 4

Perfect information about the future.

Assumption 5

“You only get what you pay for.”

Assumption 6

Price is a proxy for pleasure.

Assumption 7

Self-interest Only.

Assumption 8

No joint production.

Reality 1

Our economy is dotted with centers of market power, from large corporations to unions. Furthermore, employers have an edge in bargaining with workers because of the threat of unemployment

Reality 2

In fields such as mass-production industry, transportation, communications, and agriculture, large producers enjoy a cost advantage, limiting competition

Reality 3

The world is full of “lemons—goods” about which the buyer is inadequately informed. Also, people are not mind-readers, so sellers get stuck with surpluses and willing buyers are unable to find the products they want.

Reality 4

Uncertainty clouds the future of any economy. Futures markets are limited

Reality 5

“Externalities” both positive and negative are pervasive. In a free market, polluters can impose costs on the rest of us without paying. And when a public good like a park is built or roads are maintained, everyone benefits whether or not they helped to pay for it.

Reality 6

“Conspicuous Consumption” (Veblen) and or “snob effects” will often distort prices from underlying utility.

Reality 7

Solidarity, jealousy, and even love for one’s family violate this assumption

Reality 8

Even in an age of specialization, there are plenty of exceptions to this rule. For example, large service firms such as hospitals or universities produce a variety of different services using the same resources.