Discuss a situation in which a government loan guarantee may be socially beneficial
Please provide the best answer for the statement.
Loan guarantees made by the government may be beneficial if they increase the production of a product that is under produced in the economy. The loan guarantee can provide an incentive toward producing a risky investment on a good that would produce a positive external. One problem with government loan guarantees is that they “socialize losses and privatize gains.” This means if things go wrong the taxpayer must incur the losses and if things go well private investors profit. Another issue with loan guarantees is that the lowest cost producer is not always the firm that receives the loan, but rather the ones with the best political connections.
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Suppose a tax equal to the value of the external cost of producing car batteries is imposed by government on all car battery manufacturers. All of the following will result from the tax except
A) an increase in demand for car batteries. B) a decrease in the market supply of car batteries. C) an increase in the equilibrium price of car batteries. D) a decrease in the equilibrium quantity of car batteries produced and consumed.
When long-run average cost decreases as output increases, there are definitely I. increasing marginal returns. II. economies of scale
A) only I B) only II C) both I and II D) neither I nor II
Refer to Figure 8.1. At the profit-maximizing level of output, total profit is
A) -$120. B) $0. C) $432. D) $600. E) $603.
The demand to attend a certain college is represented by a downward-sloping demand curve. The supply of spots at the college is represented by a vertical supply curve. At the tuition that students are charged, there is a shortage of spots at the college. If the demand to attend the college rises, but the tuition stays constant, it follows that the
A) GPA required to attend the college will probably rise. B) GPA required to attend the college will probably fall. C) SAT score required to attend the college will probably not change. D) a and c E) There is not enough information to answer this question.