The figure above shows the market for steel, the production of which creates pollution
a. What point represents the equilibrium price and what point represents the equilibrium quantity in an unregulated, competitive market?
b. What area represents the deadweight loss of the unregulated, competitive market outcome?
c. What point represents the efficient quantity?
d. If the output level in part (c) was achieved through the use of a government imposed tax, what price would consumers pay? What price would the producers receive? What distance represents the amount of the tax?
e. If government successfully uses marketable permits to eliminate the external cost, what point represents how much output would be produced?
a. The price is given by point c and the quantity is given by point f.
b. The deadweight loss is area gij.
c. The efficient quantity is given by point e.
d. Consumers pay a price equal to point b. Producers receive a price equal to point d. The amount of the tax is the distance bd (which is the same as gh).
e. The amount of output is the efficient quantity, point e.
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Answer the following statement(s) true (T) or false (F)
1. All cost increases are passed on to a firm's customers in the form of higher prices. 2. Higher fixed costs may cause a firm to shut down its operations but will not otherwise affect its production and pricing decisions. 3. Either a rise in marginal cost or a fall in marginal revenue could cause a firm to reduce its output. 4. Higher fuel costs would cause a delivery firm to raise the price it charges. 5. Higher insurance costs would cause a delivery firm to raise the price it charges.
When economists say investment is autonomous, they mean that investment is independent of the level of saving
a. True b. False Indicate whether the statement is true or false
When the government increases its borrowing, the budget _____ increases and government debt _____. The resulting change in investment due to this increased government borrowing is called _____
Fill in the blank(s) with correct word
Price exceeds marginal cost for a monopolistically competitive firm in long-run equilibrium because:
A. demand is perfectly elastic. B. economic profits are negative. C. economic profits are positive. D. demand is not perfectly elastic.