What is a private cost of production? What is an external cost of production? What is a social cost of production? When is the private cost of production equal to the social cost of production?
What will be an ideal response?
A private cost of production is the cost borne by the producer of a good or service. An external cost of production is the value of a negative externality borne by those who do not produce the good or service. A social cost of production is the full cost of producing a good or service, including the producer's private cost and all the external costs. The private cost is equal to the social cost when no externalities exist.
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Which of the following can result in a market producing an inefficient quantity of a good? i. competition ii. an external cost or an external benefit iii. a tax
A) i only B) iii only C) ii only D) ii and iii E) i and iii
One characteristic of a public good is that it
A) is available for consumption by only a few individuals at any particular time. B) always eliminates the free-rider problem. C) can be consumed simultaneously by many individuals. D) can be easily subdivided into small units.
Other things being equal, the increase in rents that occurs after rent controls are abolished is smaller when:
A.rented homes and owned homes are substitutes. B. rented homes and owned homes are complements. C. the own price elasticity of demand for rental homes is price inelastic. D. the own price elasticity of demand for rental homes is price elastic. E. the own price elasticity of demand for rental homes has unitary price elasticity.
Refer to Figure 26-4. If the equilibrium quantity of loanable funds is $56 billion and if the rate of inflation is 4 percent, then the equilibrium real interest rate is
a. 6 percent
b. higher than 8 percent
c. lower than 6 percent.
d. between 6 percent and 8 percent