Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D 2 and S 2 . If there are substantial external costs associated with the production of Z, then:
A. a price lower than B and an output greater than G would improve resource allocation.
B. government should levy a per-unit excise tax on Z to shift the demand curve to the right.
C. government should levy a per-unit excise tax on Z to shift the supply curve toward S 1 .
D. government should subsidize the production of Z to lower equilibrium price and increase
equilibrium output.
C. government should levy a per-unit excise tax on Z to shift the supply curve toward S 1 .
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A large farm uses fertilizer that nearby landowners complain may contaminate their water. Tests are conducted and contaminants are found. The costs resulting from this decision are referred to as
A) implicit costs. B) factor costs. C) external costs. D) opportunity costs.
Assume a market price gets set artificially high-that is, it gets set above the equilibrium price. This change means:
A. Every consumer loses surplus, and it all gets transferred to producers. B. Every producer gains surplus, due to the higher price now being charged. C. Some consumers drop out of the market, and those left lose some surplus. D. None of these is true.
Assume that the expectation of declining housing prices cause households to reduce their demand for new houses and the financing that accompanies it. If the nation has highly mobile international capital markets and a flexible exchange rate system, what happens to the real risk-free interest rate and the nominal value of the domestic currency in the context of the Three-Sector-Model?
a. The real risk-free interest rate falls, and nominal value of the domestic currency rises. b. There is not enough information to determine what happens to these two macroeconomic variables. c. The real risk-free interest rate rises, and nominal value of the domestic currency remains the same. d. The real risk-free interest rate falls, and nominal value of the domestic currency falls. e. The real risk-free interest rate rises, and nominal value of the domestic currency falls.
Refer to the information provided in Figure 16.2 below to answer the question(s) that follow.
Figure 16.2Refer to Figure 16.2. The ________ imposed as a result of producing the market (unregulated) level of cars is $350.
A. marginal private cost B. marginal social cost C. marginal social benefit D. total damage