If a profit-maximizing competitive firm ________ compensate society for a negative externality, the firm will choose to produce where price equals marginal cost.
A. is pressured to
B. does not have to
C. voluntarily chooses to
D. is legally bound to
Answer: B
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Farmer Fanny sells her crops in a perfectly competitive market. If she produces 500 bushels for total revenue of $3,000 and if harvesting the 501st bushel would raise her total cost from $2,500 to $2,510, her
a. revenue will increase by $4 if she harvests the 501st bushel b. revenue will fall by $4 if she harvests the 501st bushel c. average fixed cost will rise if she harvests the 501st bushel d. profit will fall by $10 if she harvests the 501st bushel e. profit will fall by $4 if she harvests the 501st bushel
Kara receives a promotion at work, which increases her income. We would expect Kara’s demand for
a. each good she purchases to remain unchanged.
b. normal goods to decrease.
c. substitute goods to increase.
d. inferior goods to decrease.
Let C = 40 + 0.8y and I = 10. Autonomous consumption is
A) 10. B) 32. C) 40. D) 50.
Sam's production possibilities frontier has good A on the horizontal axis and good B on the vertical axis. If Sam is producing at a point inside his frontier, then he
A) can increase production of both goods with no increase in resources. B) is fully using all his resources. C) values good A more than good B. D) values good B more than good A.