Refer to the competitive market diagram for product Z. Assume that the current market demand and supply curves for Z are D 2 and S 2 . If there are substantial external benefits associated with the production of Z, then:
A. efficient resource allocation occurs at output G and price B because the market
mechanism does not measure all benefits.
B. an output smaller than G would improve resource allocation.
C. government should levy a per-unit excise tax on Z to shift the demand curve toward D 1 .
D. an output greater than G would result in a more efficient allocation of resources.
D. an output greater than G would result in a more efficient allocation of resources.
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The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A B. recessionary; C C. recessionary; B D. expansionary; A
If TC = 321 + 55Q - 5Q2, then average total cost at Q = 10 is:
a. 10.2 b. 102 c. 37.1 d. 371 e. 321
Insurance policies can be bought to cover unexpected costs due to which kind of risk?
A. Fire damage to your home B. Automobile theft C. Fighting a rare disease D. Individuals can buy insurance to cover all these risks.
Surplus value that is lost because something is keeping the market from functioning as well as it can is called
A) a tax. B) a subsidy. C) rent seeking. D) deadweight loss.