Are there any types of market failure that result in the underproduction of a good? Explain
Yes. There are two. Underproduction occurs when there is a positive externality associated with production
of a good. It also occurs when a public good exists. There are free riders in the markets for both of these
types of goods, whose preferences for the good will not be considered by the market.
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Refer to the scenario above. You should use ________ to make your decision
A) backward induction B) forward induction C) mixed strategies D) your dominant strategy
If a factor of production comes to have more and more alternative uses, its supply curve to any one use
a. remains unchanged. b. becomes more inelastic. c. becomes more elastic. d. may move in any direction.
The opportunity cost of an action is
a. objective and will be the same for all individuals. b. a measure of the undesirable aspects involved in the action. c. applicable only to choices involving material goods like commodities. d. the highest valued alternative forgone as the result of choosing an option.
Suppose a tax of $5 per unit is imposed on a good, and the tax causes the equilibrium quantity of the good to decrease from 200 units to 100 units. The tax decreases consumer surplus by $450 and decreases producer surplus by $300 . The deadweight loss from the tax is
a. $250. b. $500. c. $750. d. $1,000.