Because smoking causes illness and disability to smokers, society must maintain more health-service capacity than it would need in the absence of smoking. Since the cost of maintaining this capacity is covered to a substantial degree by health insurance, even nonsmokers must pay higher premiums. Also, smokers hurt nonsmokers as a result of "passive smoke." The Rand Corporation estimates these
costs to be 29 cents per pack of cigarettes. Cigarette taxes average 37 cents per pack. Based on the economist's definition of efficiency, it follows that
a. cigarette taxes are too high, and cigarette production is lower than the efficient amount.
b. cigarette taxes should be increased until external costs are zero.
c. since the tax exceeds the marginal cost, we have a better than efficient outcome.
d. we are overconsuming cigarettes.
a
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Use the following table for Country X to answer the next question. Column 1 of the table is the world-market price of a product, Column 2 is the quantity demanded domestically (Qdd), and Column 3 is the quantity supplied domestically (Qsd). Assume the small-country model is applicable.PriceQddQsd$5.002004004.002503503.003003002.003502501.00400200If Country X opens itself up to international trade and the world-market price of the product is $3, then Country X will
A. neither export nor import the product. B. import some units of the product. C. not produce the product. D. export some units of the product.
Which of the following probably has the shortest long run?
a. a law firm b. a steel mill c. an automobile plant d. a tire factory e. an aircraft engine factory
Gemma and Emily expect investments A and B to yield an annual return of 15 percent and 10 percent respectively. While Gemma invests in A, Emily invests in B. This implies that Gemma has a higher risk tolerance than Emily
Indicate whether the statement is true or false
At market equilibrium
A) demand equals supply. B) quantity demanded equals quantity supplied. C) surpluses are greater than shortages. D) shortages are greater than surpluses.