Refer to Figure 5-1. If, because of an externality, the economically efficient output is Q2 and not the current equilibrium output of Q1, what does S1 represent?
A) the market supply curve reflecting marginal social cost
B) the market supply curve reflecting implicit cost
C) the market supply curve reflecting external cost
D) the market supply curve reflecting marginal private cost
D
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A firm is considering entering a market where demand for its product is Q = 100 - P. This demand function implies that the firm’s marginal revenue function is MR = 100 - 2Q. The firm’s total cost of producing the product for that market is TC = 500 + 10Q + Q2 which indicates that its marginal cost function is MC = 10 + Q. Indicate whether or not the firm should enter the market by calculating the firm’s profit (Hint: to find the price that the firm should charge, take the profit maximizing quantity and plug it into the demand equation). Describe how your previous answer would change if the firm’s total cost function became TC = 1000 + 10Q + Q2.
What will be an ideal response?
Countries that persistently expand the supply of money at a rapid rate can expect to experience
a. high rates of inflation b. rapid economic growth. c. lower interest rates. d. low rates of unemployment.
The real rate of interest measures the ________ of capital investment.
A. marginal benefit B. value of the marginal product C. relative price D. opportunity cost
Unemployment that is caused by business recessions is called
A. seasonal unemployment. B. frictional unemployment. C. structural unemployment. D. cyclical unemployment.