The expected damage to innocent third parties per unit of the good produced is shown as the "external cost" in Figure 27.1. An unregulated competitive market for the product produces a quantity of Q* units, which sell for a price of P* per unit. The amount producers of this product could reasonably afford to spend per unit produced in order to successfully insulate themselves from possible just and reasonable jury awards in lawsuits is 
A. greater than the external cost.
B. zero.
C. equal to the external cost.
D. greater than zero but less than the external cost.
Answer: C
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Refer to the table below. The perfectly competitive firm has a random demand with a 50 percent chance of being $6 and a 50 percent chance of being $8. What quantity should the firm produce to maximize its expected profit?
The above table summarizes the marginal cost of production at various quantity levels for a perfectly competitive firm.
A) 110
B) 140
C) 130
D) 120
The price elasticity of demand is
a. irrelevant to the determination of prices, incomes, and interest rates b. indeterminate in most cases c. the percentage change in price divided by the percentage change in quantity demanded d. the percentage change in price with respect to the percentage change in quantity supplied e. the percentage change in quantity demanded divided by the percentage change in price
Within the framework of the AD/AS model, if a long-run equilibrium is present in the goods and services market,
a. decision makers will have accurately forecast the current price level when they arrived at resource price and loanable funds agreements. b. the profit rates of the firms will generally exceed the competitive level. c. the actual rate of unemployment will be less than the natural rate of unemployment. d. output will exceed the economy's long-run sustainable output.
Jamaica has a comparative advantage in the production of aluminum, but currently allows no international trade in aluminum. We can conclude that a. the domestic price of aluminum in Jamaica is higher than the world price for aluminum. b. Jamaica has an absolute advantage in the production of aluminum
c. Jamaica should import aluminum. d. the domestic price of aluminum in Jamaica is lower than the world price for aluminum.