The purchase of fire extinguishers by apartment dwellers provides benefits to their neighbors. Explain why this situation leads to an inefficient outcome
What will be an ideal response?
When the person renting an apartment buys a fire extinguisher, the decision is based on the utility the person expects to receive from owning it. However, if his neighbor also receives utility from his purchase of the fire extinguisher, its true social value will not be reflected in the price. Thus, too few fire extinguishers will be purchased.
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Refer to Figure 7.1. The benevolent social planner would want the outcome represented in the ________ box
A) upper left B) upper right C) lower left D) either A or C
If this pollution occurs, the marginal social cost equals the
A) marginal external cost. B) private marginal cost. C) sum of the private marginal cost and the marginal external cost. D) private marginal cost minus the marginal external cost.
What is Joseph Stiglitz' main criticism regarding intellectual property rights protection?
What will be an ideal response?
In natural and platform monopolies, economists argue that regulation:
A. is not explicitly desirable, and society should rather rely on direct competitive forces. B. is desirable, and should involve strict enforcement. C. is irrelevant. D. should be heavily enforced by government.