A positive externality exists and government wants to apply a per-unit subsidy in order to bring about an efficient outcome. Under what condition will the solution (the subsidy) be worse than the problem (the market failure)?
A. Under the condition that the subsidy is greater than the marginal external benefit (associated with the positive externality).
B. Under the condition that the post-subsidy output is not farther away from the efficient level of output than the pre-subsidy output is from the efficient level of output.
C. Under the condition that the post-subsidy output is farther away from the efficient level of output than the pre-subsidy output is from the efficient level of output.
D. Under the condition that the subsidy is less than the marginal external benefit (associated with the positive externality).
E. none of the above
Answer: C
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Refer to Table 16-3. Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay
What is Julie's total revenue and how many hours of service will be purchased? A) 1 hour and her total revenue = $7 B) 4 hours and her total revenue = $39 C) 4 hours and her total revenue = $28 D) 5 hours and her total revenue = $35
____ occurs when a consumer's quantity demanded for a good increases because a ____ number of consumers purchase the same good
a. A negative network externality; greater b. A positive network externality; greater c. Bandwagon effect; fewer d. A positive network externality; fewer
If a business makes the determination that an investment makes sense at the current interest rate, but before they can act, the interest rates fall
A. they will go ahead with the investment because interest rates have nothing to do with whether an investment makes sense. B. it will only make the situation better, so they will clearly make the investment. C. it will cause them to not make the investment regardless of the decrease. D. they will have to recalculate whether it still makes sense.
The statement "Gross domestic product (GDP) values all output equally" means that:
a. household production is treated the same as production by firms
b. depreciation of manufactured capital is treated the same as depletion of natural resources.
c. the purchase of pollution control equipment is valued the same as pollution itself.
d. leisure time is valued the same as time spent working a job.
e. the market price of output is the measure of that output's value.