Refer to Figure 4-3. What area represents the deadweight loss at P2?
A) G + H B) C + E + H C) C + E D) B + C
C
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Which of the following statements is true?
A) Explicit costs are accounting costs, not economic costs; implicit costs are economic costs, not accounting costs. B) Economic costs include both explicit costs and implicit costs. C) An explicit cost is an actual cost; an implicit cost is a theoretical cost. D) An explicit cost is more important, dollar for dollar, than an implicit cost.
Refer to Figure 6.3. The situation pictured is one of
A) constant returns to scale, because the line through the origin is linear. B) decreasing returns to scale, because the isoquants are convex. C) decreasing returns to scale, because doubling inputs results in less than double the amount of output. D) increasing returns to scale, because the isoquants are convex. E) increasing returns to scale, because doubling inputs results in more than double the amount of output.
One result of asymmetric information about people's ability to repay a loan is that:
A. loans will only be made to people who don't pay them back. B. a bank could make many loans to people who don't pay them back. C. lenders are better off than with perfect information. D. banks will not make loans.
One difficulty in using voluntary transactions to internalize externalities is that
A) people are motivated by self-interest and are often unwilling to engage in a transaction that might make another person better off. B) the government usually will not enforce contracts of this type. C) transaction costs of coming to an agreement can be very large when numerous people are involved. D) people usually don't understand what the real opportunity costs are that they face.