If the production of a good generates a negative externality, then at the market equilibrium quantity, the marginal cost to society of another unit of the good will be:
A. less than the marginal benefit of another unit.
B. greater than the marginal benefit of another unit.
C. negative due to the external cost.
D. equal to the marginal benefit of another unit.
Answer: B
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The manager of Steel Works learns of a new technological interdependency between the final stage of production and the distribution of the final product. Steel Works currently contracts with another firm to distribute the product. If Steel Works vertically integrates with the distributor firm, which of the following is true?
A) Steel Works is likely to incur managerial diseconomies as a result of an increase in the complexity of the firm. B) With certainty, the combined firm will earn greater economic profits. C) Steel Works will not incur managerial diseconomies. D) Steel Works will automatically create an internal successive monopoly.
An adverse supply shock results in an increase in the price level and an increase in Real GDP
Indicate whether the statement is true or false
We typically call an external cost:
A. a network externality. B. a negative cost. C. a negative externality. D. a societal drain.
Refer to the graph shown, which depicts a perfectly competitive firm. When it is maximizing profit, the total profit earned by the firm represented is:
A. $275. B. $330. C. $220. D. $605.