Attractive landscaping increases the property values of surrounding homes, creating a marginal benefit. The figure above represents the market for monthly landscaping contracts
a) What is the marginal social benefit of the 40th contract? Of the 60th contract? b) What is the marginal private benefit of the 40th contract? c) What is the marginal external benefit of the 40th contract? d) What is the unregulated competitive equilibrium price and quantity? e) What is the efficient quantity? f) What is the amount of the deadweight loss?
a) The marginal social benefit of the 40th contract is $100. The marginal social benefit of the 60th contract is $80.
b) The marginal private benefit of the 40th contract is $60.
c) The marginal external benefit of the 40th contract is $40.
d) The equilibrium price is $60 per contract and the equilibrium quantity is 40 contracts a month.
e) The efficient quantity is 60 contracts a month.
f) The deadweight loss equals $400 per month.
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The theory of monopolistic competition predicts that in long-run equilibrium a monopolistically competitive firm will:
a. produce the output level at which price equals long-run marginal cost. b. operate at minimum long-run average cost. c. overutilize its insufficient capacity. d. produce the output level at which price equals long-run average cost.
The production possibilities curve illustrates: a. the minimum quantity of two resources necessary to produce a given level of output
b. that when resources are currently being used inefficiently, it is possible to increase production of one good only by sacrificing some of another good. c. that when resources are currently being used efficiently, it is possible to increase production of one good only by sacrificing some of another good. d. the minimum quantities of output that can be produced using available resources.
Engel's law suggests that the demand for food is
a. income inelastic b. income elastic c. price inelastic d. price elastic e. highly correlated with population size
Economic takeoff:
A. occurs when development becomes self-sustaining. B. will eventually occur in all developing countries. C. typically occurs in the absence of foreign investment. D. has yet to occur in any developing country.