Which of the following occurs when an externality is internalized?
A) Higher social well-being
B) Higher private benefit
C) Larger deadweight loss
D) Higher returns to scale
A
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What must be true in terms of the income effect, the substitution effect, and the type of good for the good's demand curve to be upward sloping?
What will be an ideal response?
Characteristics of a perfectly competitive market include:
A. the presence of transaction costs. B. homogenous products. C. few sellers, each with a large market share. D. All of these are characteristics of a perfectly competitive market.
Continuing with the same vacation-insurance company from the preceding question, is there any vacation-day price that would both strictly increase the family's expected utility (compared to no insurance) and strictly increase the profits of the risk-neutral insurance company?
a. No. b. Yes, 3 or 4. c. Yes, 4. d. Yes, 4 or 5.
If price falls below the minimum point on the AVC curve, in the short run the firm should ________, and in the long run the firm should ________.
A. produce where MC = MR; exit the industry B. shut down; exit the industry C. shut down; expand D. produce where MC = MR; expand