Suppose a professor announces at the beginning of a course that he will give no failing grades because they are too damaging to self-esteem. How does such a policy affect equality and efficiency?
Equality increases, since the spread of grades now ranges from A to D, rather than A to F. Efficiency decreases, since student effort may decline. Those students who just want to pass the course need make no effort at all. (Beyond the subject is whether giving someone something for nothing increases self-esteem over the long run.)
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Refer to A Negative Externality Problem. According to Pigou, the socially optimal level of production is
Demand for a good is given by Q = 100 - P. The private marginal cost of production is MCP = 10 + Q. There is a $10 per unit negative production externality in this situation. a. 0 units. b. 30 units. c. 40 units. d. 45 units.
Which of the following statement(s) best describes trade-offs?
a. The trade-offs in many production possibilities frontiers are represented by a straight line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to diminish. b. The trade-offs in many production possibilities frontiers are represented by a curved line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to increase. c. The trade-offs in many production possibilities frontiers are represented by a straight line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to increase. d. The trade-offs in many production possibilities frontiers are represented by a curved line because the law of diminishing returns holds that as resources are added to an area, the marginal gains tend to diminish.
Technological innovations will cause
a. production to increase but the production possibilities curve to remain unchanged b. the production possibilities curve to shift to the left c. the production possibilities curve to shift to the right d. an economy to operate within its production possibilities curve e. production at a point above or exterior to the production possibilities curve
Federal budget deficits became progressively smaller during the 1990s, and turned into a surplus by 1998
Indicate whether the statement is true or false