How does a command-and-control policy differ from a market-based policy?
What will be an ideal response?
Governments sometimes use a mix of policies to encourage firms and consumers to internalize externalities. Command-and-control is a centralized system of controlling production in which an authority decides the allocation of resources. Here, the government directly regulates the allocation of resources (for example, the government bans smoking in restaurants). Market-based policies are those where the government provides incentives for private organizations to internalize the externality. Market-based policies include Pigouvian taxes or subsidies and markets for pollution rights.
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A vertical merger, like the merger of Seagate and Dell, would be attractive
a. only to Dell because it then avoids paying monopoly prices to Seagate. b. only to Seagate because it can then obtain two monopoly rents. c. to both Seagate and Dell but not to consumers who would find no difference in their welfare. d. to Seagate, Dell and consumers, all of whom would stand to benefit in some way.
Which of the following describes the relative positions of the demand curve and the average total cost (ATC) curve of a monopolistically competitive firm that earns a profit in the short run?
A) In the short run, the firm's demand curve will lie above its ATC curve. The demand curve will be tangent to the ATC curve in the long run. B) In the short run, the firm's demand curve will lie below its ATC curve. The demand curve will be tangent to the ATC curve in the long run. C) In the short run, the firm's ATC curve will cross the demand curve at the profit maximizing level of output. The demand curve will be tangent to the ATC curve in the long run. D) In the short run, the firm's demand curve will cross its ATC curve at the ATC curve's lowest point. The demand curve will be above the ATC curve in the long run.
Increase in capacity utilization will ________ the expenditure curve:
A) decrease. B) increase. C) not change. D) none of the above.
The long-run average cost of producing 12 units of output is $54; the long-run average cost of producing 13 units is $56. These numbers illustrate:
A. diseconomies of scale. B. economies of scope. C. economies of scale. D. diminishing marginal productivity.