The table above provides information about the marginal social cost and marginal social benefit of street lights, which are a public good
a) What quantity would a private company provide? Why?
b) What is the efficient quantity?
a) Street lights are a public good, so a private company would provide zero street lights. The company would provide zero because everyone would free ride, that is, no one would voluntarily pay for the street lighting. Because the company knows that no one will pay, it will not provide any street lights.
b) The efficient quantity is 3 street lights per block because that is the quantity that equates the marginal social benefit to the marginal social cost.
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At low levels of production, marginal productivity of labor increases as labor increases. At high levels of production, marginal productivity of labor decreases as labor increases. Are these two statements contradictory? Explain
What will be an ideal response?
The vertical long-run Phillips curve
a. implies that the Fed cannot influence the unemployment rate in the long run. b. implies that the Fed can influence the unemployment rate in the long run. c. implies that the Fed can influence both the unemployment rate and the inflation rate in the long run. d. implies that the Fed can reduce the unemployment rate in the long run only at the expense of higher inflation rate. e. none of the above.
Inefficiency occurs when an economy is operating outside its production possibilities curve.
a. true b. false
Suppose a monopolist's costs and revenues are as follows: ATC = $50.00; MC = $45.00; MR = $40.00; P = $55.00. The firm should
A) increase output and decrease price. B) decrease output and increase price. C) not change output or price. D) shut down.