The existence of a negative externality will result in:
A. a less than optimal level of production.
B. elimination of deadweight loss.
C. a greater than optimal level of production.
D. prices that are artificially high.
Answer: C
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The following changes in a consumer's economic circumstances result in a steeper budget line with the vertical intercept unchanged. (Denote the good on the horizontal as good 1 and the good on the vertical as good 2.)
A. A k percent decrease in the price of good 2 combined with a k percent decrease in income B. A k percent increase in the price of good 2 combined with a k percent decrease in income C. A k percent decrease in the price of good 2 combined with a k percent increase in income D. A k percent increase in the price of good 2 combined with a k percent increase in income. E. None of the above
Mandatory motorcycle helmet laws are designed to reduce the severity of injuries resulting from motorcycle involvement in traffic accidents. In this sense, these mandatory helmet laws are reducing ________ of risky behavior
A) negative externalities B) the social benefit C) positive externalities D) the private benefit
Figure 5-19
In Figure 5-19, the consumer experiences at point C
a.
greater total utility than at point D.
b.
greater total utility than at point E.
c.
less total utility than at point D.
d.
total utility equal to that experienced at point D.
Suppose firms in an industry hire unskilled labor and skilled labor. Unskilled labor is a substitute for capital and skilled labor is a complement with capital. A decrease in the real price of capital would
A. cause the demand for labor to increase, raising wages of both skilled and unskilled labor. B. cause the demand for unskilled labor to increase and the demand for skilled labor to decrease. The wage of unskilled labor would rise relative to the wage of skilled labor. C. cause the demand for both kinds of labor to decrease. Wages rates of both kinds of labor would decrease too. D. cause the demand for unskilled labor to decrease and the demand for skilled labor to increase. The wage of unskilled labor would decrease relative to the wage of skilled labor.