The First Welfare Theorem holds that the allocation of goods resulting from competitive prices is "efficient," which is the equivalent of "equitable."
Answer the following statement true (T) or false (F)
False
Rationale: The First Welfare Theorem holds that the allocation of goods resulting from competitive prices is "efficient," but that is not the equivalent of "good" or "equitable."
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If a firm is not forced to take account of a negative externality it creates, it will produce the quantity at which
a. the marginal cost of production equals the marginal private benefit b. the marginal cost of production equals the marginal social benefit c. the marginal social cost of production the equals marginal private benefit d. the marginal social cost of production equals the marginal social benefit e. price equals marginal social benefit
Other things being equal, when average productivity falls:
A. average fixed cost must rise. B. marginal cost must rise. C. average variable cost must rise. D. average total cost must rise.
Given the slope of a supply curve, if a demand curve becomes more price elastic:
A. the share of a tax consumers pay becomes smaller. B. the share of a tax consumers pay becomes greater. C. consumers pay the entire amount of a tax. D. There is not sufficient information.
If the government wishes to correct the existence of a negative externality, it could
A. grant subsidies to consumers to stimulate demand. B. impose a tax on the producers to reduce supply. C. grant subsidies to producers to reduce supply. D. impose taxes on consumers to stimulate demand.