Suppose that a firm in a competitive market faces the following prices and costs:
Refer to Table 14-11. The marginal revenue from producing the 5th unit equals
(i) $6.
(ii) the price.
(iii) the marginal cost.
a. (i) only
b. (i) and (ii) only
c. (iii) only
d. (i), (ii) and (iii)
Ans: b. (i) and (ii) only
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Price-discriminating, profit-maximizing monopolists charge higher prices to buyers who have more elastic demand curves
a. True b. False
Why do externalities arise?
a. The costs of production are not borne by the producer. b. An economic activity imposes a burden on those who are not directly involved in it. c. The consumption of a public good is nonexcludable. d. The government produces goods and services which are consumed by only a particular group of people. e. Goods of mass consumption are not produced as they do not yield profit for the producers.
In the socialist controversy
a. Marx demonstrated the superiority of capitalism b. Marx demonstrated the superiority of socialism c. Keynes showed that capitalism was unstable d. Hayek and Mises argued that socialism would be inefficient e. Kornai talked about soft budgets
A government action that can help correct positive externalities is
A. an effluent fee charged to producers of the good that provides external benefits. B. a subsidy to consumers of the good that provides external benefits. C. a tax on producers of the good that provides external benefits. D. regulations aimed at reduced production by sellers of the good that provides external benefits.