If a profit-maximizing perfectly competitive firm does not have to compensate society for a negative externality, the firm will choose to produce where
A. price equals marginal social cost.
B. marginal cost equals marginal social cost.
C. marginal revenue equals marginal social cost.
D. price equals marginal cost.
Answer: D
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A local fast-food restaurant mails out coupons for a free sandwich to every home in the community. The opportunity cost of redeeming the sandwich for someone who was on a diet might be:
A. lost wages due to spending time in a long line instead of eating a Healthy Choice meal in your office. B. not eating because you are on a "get fit for the summer" diet plan. C. eating a "Tough Man's Burger," which is one of your favorite fast food options. D. There was no opportunity cost for the sandwich because it was free.
A sunk cost is one that
a. changes as the level of output changes in the short run b. was paid in the past and will not change regardless of later decisions c. should determine the rational course of action in the future d. has the most impact on profit-maximizing decisions e. influences rational decision makers
Prohibiting price increases in situations of true scarcity
a. prevents the market mechanism from reallocating resources more efficiently. b. discourages production. c. may lead to extreme shortages of vitally needed products. d. All of the above are correct.
Which one of the following is an area of continued disagreement among modern macroeconomists with regard to the use of fiscal policy?
What will be an ideal response?