Why do polluting firms overproduce? Use a completely and correctly labeled graph to illustrate your answer.
What will be an ideal response?
An appropriate diagram should resemble Figure 15-2 from the textbook. As reviewed in the current chapter, polluting firms produce with a detrimental externality, and they do not pay the full social cost of production. With a lower price, they can move along the demand curve to a higher quantity demanded and will sell more. As indicated in Chapter 15, an externality will result in allocative inefficiency; the price of the last unit produced is less than the marginal social cost.
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Which of the following is ALWAYS true for a profit-maximizing single-price monopolist?
A) p > Mc B) MR = MC C) p= MR D) all of the choices are always true
Wage decreases lead to a decrease in aggregate quantity supplied
a. True b. False Indicate whether the statement is true or false
Coffee prices fell in the 1990s because of:
a. subsidies by developed countries to their coffee producers. b. subsidies by developing countries to their coffee producers. c. new suppliers in Brazil and Vietnam. d. a fall in world demand for coffee.
Political instability is an impediment to development mainly because it:
A. undermines both domestic and foreign investment in a developing country. B. creates cultural and social differences among groups in developing countries. C. produces excessive levels of domestic saving. D. redistributes income.