Suppose there are two identical factories on a river. Both require clean water for their production processes. The upstream firm gets clean water from the river and dumps dirty water into the river. The downstream firm must clean the water it gets from
the river before it can use the water and later it dumps dirty water into the river. In this situation
A) the private costs of the two firms are the same since both dump dirty water into the river.
B) the upstream factory's private costs are lower than its social costs since it passes the costs of the dirty water on to the downstream firm. For the downstream firms, private costs equal social costs.
C) the private costs of the downstream firm are greater than the private costs of the upstream firm and the social costs are less than the private costs for both firms.
D) the private costs of the upstream firm are less than its social costs while the social costs of the downstream firm are less than its private costs.
Answer: B
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When economists say that the supply for a product has decreased, they mean that the
A. product has become more expensive and thus consumers are buying less of it. B. supply curve has shifted to the left. C. product has become particularly abundant for some reason. D. supply curve has shifted to the right.
Compare and contrast the marginal and average tax rates
What will be an ideal response?
Externalities exist because
A) private costs differ from social costs. B) private costs are equal to social costs. C) government has created them. D) they are a function of socialism.
In the above figure, if d1 is the relevant demand curve for this firm, then which level of output will maximize this firm's profits or minimize its losses?
A. A B. B C. C D. D