Assume that there are only two good for a consumer to purchase. Explain why a consumer can not be maximizing utility if both goods are inferior.
What will be an ideal response?
If both goods are inferior then consumption of both goods would have to go down if income increased. But, this would have to put them on a lower indifference curve. And since income went up, the consumer could have reached a higher indifference curve. Thus, the only way that both goods could be inferior would be if the consumer desired less utility: a violation of utility maximization.
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Answer the following statement(s) true (T) or false (F)
1. Incremental costs are the accumulated expenditures associated with an environmental policy initiative. 2. When implementing environmental policy, all expenses paid by the government plus compliance costs paid by all economic sectors are known as explicit costs. 3. Fixed costs are controllable in the short run but not the long run. 4. The accounting equivalent of variable costs is capital costs. 5. The value of reduced product variety due to an environmental policy initiative or regulation is an example of an implicit cost.
In the short run, a firm in monopolistic competition produces where
A) MR = MC and economic profit is equal to zero. B) MR = MC. C) the given market price is equal to MC and economic profit is equal to zero. D) the given market price is equal to MC.
Students arriving late to class are a potential negative externality because their tardiness may interrupt the instructor and distract students
Can you think of any way in which this externality could be curbed? That is, can you think of any methods that could be employedto internalize this negative externality?
Which of the following activities could be prohibited by the Endangered Species Act?
A) Building a fence that would impact the breeding ground of an endangered rodent. B) The hunting of a federally listed endangered bird. C) Draining water from a pond where an endangered plant lives. D) All of the above