As firms use more and more of an input, ________
A) the marginal product of other inputs tends to increase
B) the marginal product of the input declines
C) the price of the input may increase
D) all of the above
E) none of the above
D
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Use the following diagram in which S is the market supply curve and S1 is a supply curve comprising all costs of production, including external costs, to answer the question below.
Assume that the number of people affected by these external costs is large. If the government wishes to establish an optimal allocation of resources in this market, it should
A. tax producers so that the market supply curve shifts leftward (upward). B. subsidize consumers so that the market demand curve shifts leftward. C. not intervene because the market outcome is optimal. D. subsidize producers so that the market supply curve shifts leftward (upward).
The shorter is the interval between firms' price adjustments,
A) a given unexpected increase in aggregate demand will cause a larger increase in output. B) the greater is the scope for activist policies to stabilize the economy. C) the smaller is the scope for activist policies to stabilize the economy. D) a given unexpected increase in aggregate demand will cause a smaller increase in the price level in the short run.
Which of the following statements regarding perfect price discrimination is FALSE?
A) Only part of consumer surplus is captured by the firm as producer surplus. B) For the firm, the market demand curve becomes the firm's marginal revenue curve. C) The monopoly produces the output at which the marginal revenue equals the marginal cost. D) No deadweight loss is created.
The monopolist, unlike the perfectly competitive firm, can continue to earn an economic profit in the long run because of:
a. collusive agreements with competitors. b. price leadership. c. cartels. d. a dominant firm. e. extremely high barriers to entry.