Due to a firm generating external costs, the government decides to ________ the firm. When this happens, the firm will produce ________ units of output than before the tax was imposed in order to continue maximizing profits.
A. tax; fewer
B. subsidize; fewer
C. subsidize; more
D. tax; more
Answer: A
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Why must total income be identical to the dollar value of total output?
What will be an ideal response?
Economic restructuring that takes place as a result of opening to trade with other countries
A) contradicts the idea of gains from trade. B) causes some trading activity to be zero sum. C) worsens the nation's allocation of resources. D) improves the nation's allocation of resources. E) is a highly unlikely event.
Advertising:
A. is valuable because it provides free information about products and prices to consumers. B. is harmful because it creates a false sense of differentiation, driving prices up unnecessarily. C. Neither A nor B is true. D. Both A and B are true.
Mutually beneficial trade will occur whenever the exchange rate between the goods involved is set at a level where: a. each country can export a good at a price below the opportunity cost of producing the good in the domestic market. b. each country can import a good at a price below the opportunity cost of producing the good in the domestic market. c. the exchange ratio is exactly equal to
the opportunity cost of producing the good in each country. d. each country will specialize in the production of those goods in which it has an absolute advantage.