When the value of a product to each user, including existing users, increases due to an increase in the total number of users, we refer to this as:
A. Income transfer
B. Price discrimination
C. Simultaneous consumption
D. Network effects
D. Network effects
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Suppose x is an inferior good. Then we will overestimate the deadweight loss from taxes on consumption good x if we use the uncompensated demand curve rather than the marginal willingness to pay (or compensated demand) curve.
Answer the following statement true (T) or false (F)
The role of government in a market economy includes all of the following except
a. providing services such as national defense. b. collecting taxes. c. extensive ownership of productive resources. d. making and enforcing laws.
A tax on cigarettes will have the effect of properly dealing with the externality unless the tax
A. is so high that it generates a black market. B. causes people to use smoke less. C. is lower than the marginal external costs. D. is lower than the marginal external costs, or it is so high that it generates a black market.
Suppose the absolute price elasticity of demand for magazine subscriptions is 1.5. In order to increase the total revenues from subscriptions, the publishers should
A) increase the price of the newsletters. B) reduce the price of the newsletters. C) sell the newsletters on the inelastic portion of its demand curve. D) keep the price the same.