XYZ Corporation operates in a perfectly competitive market and is currently maximizing profit. To keep the firm's costs low, XYZ's managers have decided to dump waste in a nearby river
Explain why the level of output currently produced by XYZ is not efficient.
Dumping in the river creates a negative externality. Thus, there is a cost involved in the production by XYZ that is being borne by third parties. If the firm is maximizing profit and producing where price is equal to the firm's marginal costs, the firm will produce a level of output for which the true cost (private + external cost) is greater than the price. This means that the level is output is greater than the efficient level of output.
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Efficiency involves:
a. producing only one out of many possible commodities. b. producing output using the least amount of labor. c. producing as far inside the production possibilities frontier as possible. d. getting the maximum possible output from available resources. e. producing output using the least amount of capital.
The more narrowly defined a good is, the more elastic the demand for the good will tend to be, ceteris paribus.
Indicate whether the statement is true or false.
If C + I = Y and Y - C = S, then
A) I = 0. B) S = 0. C) S = I. D) Y = S + I.
A certain magazine offers its subscribers the opportunity to "Buy Now and Save." If at the time their subscription renewal is due they agree to pay for 2 years rather than 1, the renewal price will be $50 per year rather than the usual $60 per y
At what interest rate will the consumer, who is certain she will subscribe to the magazine for the next 2 years, decide to "Buy Now and Save"? A) any interest rate under 50 percent B) any interest rate over 1.5 percent C) any interest rate over 150 percent D) any interest rate under 5 percent E) She will always take this offer if she is absolutely certain to buy the magazine for another 2 years.