Graphically, the effects of an external benefit can be shown as
A) a leftward shift of the market demand curve.
B) a leftward shift of the market supply curve.
C) a downward movement along the market demand curve.
D) a rightward shift of the market demand curve.
Answer: A
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Which of the following best explains why marginal cost eventually increases as output increases?
a. economies of scale occur b. average cost increases c. total cost increases d. marginal product decreases e. fixed cost is constant
The average propensity to save (APS) is
A. the percentage of real disposable income saved. B. the percentage of additional real disposable income that will go toward real saving. C. the rate at which real savings changes over time. D. the difference between the amounts of real disposable income consumed and saved.
A company finds that at its present level of production, MR = MC at $14, MC = AVC at $15, and MC = ATC at $20. Your advice to the firm regarding its short-run operations is
A. to continue production at a loss. B. to shut down. C. to continue production, as it is earning an economic profit of $1 per unit. D. to continue production, as it is earning an economic profit of $6 per unit.
Public goods represent a market failure because
A. there is incomplete information regarding their quality. B. they are provided by firms with market power. C. by their very nature they are nonexcludable and nonrival, which makes it difficult for the private sector to supply them profitably. D. positive externalities are created through their production.