What policy approach would an economist propose to internalize the externalities created by resource use? What is the basis for, and objection to, this type of policy?
What will be an ideal response?
The answer should discuss creating and improving the functioning of markets as the preferable policy approach, as opposed to standard-setting and direct provision. The basis for such an approach is the efficiency argument. Objections could cite examples where market instruments might not suffice.
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A firm increases its output and its average total costs remain unchanged. Is the firm experiencing increasing returns to scale, constant returns to scale, or decreasing returns to scale?
What will be an ideal response?
What is the efficient quantity of snowboards in the above figure?
A) 0 B) 100 C) 200 D) 500
Most economists argue that an effective monetary policy would
a. create money faster during recessions and more slowly during booms. b. create money faster all the time. c. create money more slowly all the time. d. create money faster during booms and more slowly during recessions. e. create money slowly during booms and not at all during recessions.
If you know that the price where MC=MR at a point that is between ATC and AVC, you
A. know the firm is breaking even. B. know the firm is making a profit. C. know the firm is making a loss. D. need to know whether the firm is a price taker or a price maker to determine whether they are making a profit.