Producing where P = MC does not yield an optimal distribution of resources when externalities are present because
a. neither price nor marginal cost reflect the social costs or social benefits of production and consumption; that is, the costs and benefits to society
b. while price still accurately measures benefits, marginal cost no longer measures the cost of resources to society
c. while marginal cost accurately measures cost, price no longer measures the true social value of the goods produced
d. output would always be higher than optimal
e. output would always be lower than optimal
A
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The assumption that firms meet the demand for their products at preset prices is the key assumption upon which ________ is built.
A. the supply and demand model B. the basic Keynesian model C. Say's Law D. quantity equation for money
In order to reduce the possibility of adverse selection, banks should raise the interest rates charged on loans
a. True b. False Indicate whether the statement is true or false
This year an economy produced 3,700 coats, 3,000 shoes and 2,000 socks. The price of coats was €50, the price of socks was €3.50 and the price of shoes was €70. In the base year, prices were 10% lower. Nominal GDP was:
(a) €361,800; (b) €402,000; (c) €420,000; (d) Cannot be computed.
According to classical macroeconomic theory, in the long run
a. monetary growth affects both real and nominal variables. b. the only real variable affected by monetary growth is the unemployment rate. c. a number of factors that affect unemployment are influenced by monetary growth. d. monetary growth affects nominal but not real variables.