The Clear Plastic Company's plant discharges large quantities of toxic chemicals into some groundwater sources. Residents in the surrounding area have higher medical bills because of Clear Plastic's pollution. As long as Clear Plastic Company is allowed to emit pollution and ignore any externalities, the firm will
A. be absorbing the full value of its social costs.
B. overproduce.
C. charge too high a price for its output.
D. under produce.
Answer: B
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For a perfectly competitive firm, the long-run supply curve is its long-run marginal cost curve.
Answer the following statement true (T) or false (F)
When economists say the demand for a product has increased, they mean the:
a. demand curve has shifted to the right. b. price of the product has fallen, and consequently, consumers are buying more of it. c. cost of producing the product has risen. d. amount of the product that consumers are willing to purchase at various prices has decreased.
If the Fed lends to member banks, what happens to reserves and the money supply?
a. Reserves increase and the money supply decreases. b. Both increase. c. Reserves decrease and the money supply increases. d. Both decrease.
Answer the following statement(s) true (T) or false (F)
1. A country will gain from international trade whenever the world relative price differs from the autarkic relative price. 2. Large countries have more to gain from international trade than small countries do. 3. A perfectly competitive firm is one that can sell any quantity that it wants at any price it wants. 4. A competitive firm faces a downward-sloping demand for its product. 5. For a competitive firm, marginal revenue is constant and equal to the market price.