To maximize welfare in a competitive market that has a negative externality in production, government should tax a pollution-generating good at a specific tax equal to the marginal cost of producing the good
Indicate whether the statement is true or false
False. The tax should equal the marginal harm of the pollution at the socially optimal quantity of the good.
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The absolute price elasticity of demand for a product that has many good substitutes is probably
A) less than 1. B) greater than 1. C) equal to 1. D) infinity.
In consumer equilibrium: a. the average utility from each dollar spent is the same
b. total utility cannot be increased by reallocating spending among the goods consumed. c. total utility obtained from the consumption of each product is at a maximum. d. the marginal utility from the last unit of each good consumed is the same.
Projecting that it might temporarily fall short of legally required reserves in the coming days, the Bank of Beano decides to borrow money from its regional Federal Reserve Bank. The interest rate on the loan is called the:
A. prime rate. B. federal funds rate. C. Treasury bill rate. D. discount rate.
The free-rider problem is the absence of an incentive for
A) firms to produce public goods. B) people to use common resources. C) people to pay for what they consume. D) people to vote.