One way to achieve efficiency in a market with a negative externality is
a. to raise the market demand curve to the position of the marginal social cost curve
b. to apply the Coase theorem
c. to lower the marginal social cost curve to the position of the market supply curve
d. to eliminate all side payments
e. to raise the market supply curve to the position of the marginal social cost curve
E
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Suppose that an MBA degree creates no externality because the benefits of an MBA are internalized by the student in the form of higher wages. If the government offers subsidies for MBAs, then which of the following statements is correct?
a. The equilibrium quantity of MBAs will equal the socially optimal quantity of MBAs. b. The equilibrium quantity of MBAs will be greater than the socially optimal quantity of MBAs. c. The equilibrium quantity of MBAs will be less than the socially optimal quantity of MBAs. d. There is not enough information to answer the question.
A street vendor sells a replica of a pair of designer shoes to a young woman who believes the shoes are authentic. The street vendor is engaging in
a. both moral hazard and adverse selection. b. neither moral hazard nor adverse selection. c. moral hazard, but not adverse selection. d. adverse selection, but not moral hazard.
Fiscal policy is:
What will be an ideal response?
Recall the Application about choosing a price for drones based on a linear demand curve to answer the following question(s).Recall the Application. Suppose a firm that produces drones has a linear demand curve for its product, with a vertical intercept of $1,500. If the firm does not want the demand for its product to be price-inelastic, the minimum price it should charge is:
A. $500. B. $750. C. $1,000. D. $1,500.