If tuition at a college is $30,000 and the external benefit of graduating from this college is $10,000, then
i. in the absence of any government intervention, the number of students graduating is less than the efficient number.
ii. the government could increase the number of graduates by giving the college a $10,000 subsidy per student.
iii. the government could increase the number of graduates by giving the students $10,000 vouchers.
A) i only
B) i and ii
C) i and iii
D) ii and iii
E) i, ii, and iii
E
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Sue and Jane own two local gas stations. They have identical constant marginal costs, but earn zero economic profits. Sue and Jane constitute:
A. a Bertrand oligopoly. B. a Cournot oligopoly. C. a Sweezy oligopoly. D. None of the answers is correct.
Under what conditions would an increase in demand lead to a lower long-run equilibrium price?
A. The firms in the market are part of a decreasing-cost industry. B. The firms in the market produce an inferior good. C. Potential new firms in the market are not attracted by economic profits. D. Increases in demand cannot lead to lower long-run equilibrium prices.
Assuming a long-run aggregate supply curve, a decrease in government spending results in ________ in output and ________ in price level.
A. no change; an increase B. no change; a decrease C. a decrease; a decrease D. an increase; no change
The real-income effect of a price change is most significant when
A) the substitution effect is insignificant. B) the substitution effect is significant too. C) the good under consideration constitutes a major portion of the consumer's budget. D) the marginal utility per dollar spent on the last unit is high.