If it's possible to eliminate the problems created by externalities, why do they persist?
A. The benefits of correcting the externalities generally exceed the costs.
B. Correcting externalities would always reduce total surplus.
C. It is difficult to measure external benefits and costs.
D. None of these statements is true.
Answer: C
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Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential B. expansionary; lower; potential C. expansionary; higher; potential D. recessionary; lower; lower
The government would challenge any merger in an industry if (i) the post-merger Herfindahl index would exceed 1,000, and (ii) the merger would increase the index by more than 100 points
Indicate whether the statement is true or false
The demand for labor depends on ________ and ________.
A. the rate of price inflation; the price of the output produced B. the supply of labor; the price of output produced C. the supply of labor; the marginal product of labor D. the marginal product of labor; the price of output produced
Under both perfect competition and monopoly, a firm:
A. faces a perfectly elastic demand curve. B. maximizes profit by setting marginal cost equal to marginal revenue. C. sells at a price equal to the minimum average total cost. D. sells at a price equal to marginal cost.