A natural monopoly is defined as an industry in which one firm
A. can produce the entire industry output at a lower average cost than a larger number of firms could.
B. can produce the entire industry output at a lower marginal cost than a larger number of firms could.
C. is very large relative to other firms that could enter the industry.
D. can earn higher profits if it is the only firm in the industry rather than if other firms also enter the industry.
Answer: A
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The process by which an increase in government borrowing results in less borrowing by businesses and consumers for private investment is called
A. expansionary fiscal policy. B. the business cycle. C. crowding out. D. contractionary fiscal policy.
A paper company dumps nondegradable waste into a river that flows by the firm's plant. The firm estimates its production function to be:
Q = 6KP, where Q = annual paper production measured in pounds, K = machine hours of capital, and P = gallons of polluted water dumped into the river per year. The firm currently faces no environmental regulation in dumping waste into the river. Without regulation, it costs the firm $7.50 per gallon dumped. The firm estimates a $30 per hour rental rate on capital. The firm produces 600 million pounds of paper per year. For this problem, consider the long-run production of output. a. Determine the firm's optimal ratio of wastewater to capital. b. Given the firm's output of 600 million lbs, how much capital and wastewater should the firm employ? c. How much will it cost the firm to produce the 600 million lbs of paper? d. The state environmental protection agency plans to impose a $7.50 fee for each gallon that is dumped (this is in addition to the current cost of $7.50). Assuming that the firm intends to maintain its same output level, how much capital and wastewater should the firm employ? e. How much will the firm pay in fees? What happens to the firm's cost as a result of the fee?
The M1 money supply consists primarily of: a. savings deposits
b. certificates of deposit. c. miscellaneous near-monies. d. checkable deposits. e. money market mutual fund accounts.
Germany's environmental policies restrict the sale of nonrefillable bottles and cans. This policy reduces the imports of these products. A foreign country that argues that this policy is really intended to protect German beverage makers from competition is arguing that the policy is an example of:
A. a quota. B. a regulatory trade restriction. C. a tariff. D. a sanction.