The Coase theorem asserts that:
a. government intervention is necessary to deal with externalities.
b. there are no costs associated with pollution abatement.
c. when there are external costs, the industry supply curve reflects the true social costs.
d. when externalities are present, an economy can reach an efficient solution as long as transactions costs are not too high.
Ans: d. when externalities are present, an economy can reach an efficient solution as long as transactions costs are not too high.
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The figure above shows the market for milk. When the efficient quantity of milk is produced, the marginal social benefit from the last gallon is
A) $2.00. B) $2.50. C) $3.00. D) $3.50.
A Herfindahl-Hirschman Index is calculated by
A) summing the amount of sales by the four largest firms and dividing by total industry sales. B) summing the squares of the market shares of each firm in the industry. C) dividing the number of firms wanting to merge by the total number in the industry. D) dividing the advertising expenditures of the firms that want to merge by total industry advertising expenditures.
The time constraint for the consumer is
A) the amount of time for decision making. B) expressed as leisure time - time spent working = total time available. C) expressed as leisure time - sleep time = time spent working. D) expressed as leisure time + time spent working = total time available.
If the government undertakes expansionary fiscal policy, it:
A. should force people to change their spending patterns. B. expects aggregate demand to decrease. C. expects aggregate demand to increase. D. could increase income taxes.