There are 12 families in a gated community that are affected by air pollution from a local factory. The pollution could be reduced if the company spent $24,000 on upgraded ventilators. The company agrees to install the ventilators if the affected families contribute the $24,000. Since there are no legal restrictions governing the factory's air pollution the negotiations fail. This outcome is an example of the
A. problem that arises when property rights are not defined.
B. Coase theorem.
C. free-rider problem.
D. drop-in-the-bucket problem.
Answer: A
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Fixed costs of production in the short run
A. are low in proportion to variable costs in the short run. B. are a function of the level of variable costs. C. increase as the firm produces more output. D. cannot be reduced by producing less output.
If a consumer purchases only two goods, X and Y, and if (MUx / Px) = (MUy / Py), then the consumer cannot reallocate her expenditures on X and Y to increase her utility unless she has more money to spend
a. True b. False Indicate whether the statement is true or false
If the output of a firm is increased by one unit, the revenue addition is called
a. total revenue. b. average revenue. c. marginal revenue. d. economic profit.
If the opportunity cost of producing a good domestically is less than the opportunity cost of purchasing it on the world market, a country can gain by
A. decreasing production and increasing exports. B. decreasing production and increasing imports. C. increasing production and decreasing imports. D. increasing production and decreasing exports.