Why do firms ignore external costs when they pollute?
What will be an ideal response?
Firms have no incentive to incorporate external costs into their decision making. They do not bear the costs—the costs are external to them—and so these costs have no effect on their profits.
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The substitution effect can be measured holding ________ constant
A) income B) utility C) the price of one good D) the price of all goods
Blanca has her choice of either a certain income of $20,000 or a gamble with a 0.5 probability of $10,000 and a 0.5 probability of $30,000. The expected value of the gamble:
A) is less than $20,000. B) is $20,000. C) is greater than $20,000. D) cannot be determined with the information provided.
If the wage is below the marginal revenue product, then a profit-maximizing firm will
a. employ more workers b. employ fewer workers c. see an increase in its demand for labor d. see an increase in its supply of labor e. see a fall in its demand for labor
When does a resource earn only economic rent?
a. When the supply curve of the resource is relatively elastic b. When the supply curve of the resource is horizontal c. When the supply curve of the resource is vertical d. When the supply curve of the resource is relatively inelastic e. When the supply curve of the resource is backward bending