In order to achieve the socially optimal level of output, goods that entail negative externalities should be:
A. taxed.
B. banned.
C. provided by the government.
D. subsidized.
Answer: A
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Which of the following is a common method used by government to cope with the situation in which production of a good creates an external cost?
A) removing property rights B) subsidizing production C) marketable permits D) lottery E) vouchers
Refer to the scenario above. Suppose Pat can impose a fine of $70 if Joe chooses to keep the money and the cost of imposing such a fine to Pat is $10. Which of the following is likely to happen if Pat is known to be vengeful?
A) Joe will choose to split the money into two parts if Pat gives it to him. B) Joe will choose to keep the entire money for himself if Pat gives it to him. C) Pat will not give the money to Joe. D) An unique equilibrium will not occur.
The largest component of GDP is
A) gross private domestic investment. B) personal consumption expenditures. C) net exports of goods and services. D) government expenditure on goods and services.
A learning curve may be expressed as a relationship between the labor per unit (L) and the cumulative number of units produced (N)
Which of the following learning curves exhibits a faster reduction in cost of production due to learning, (1 ) L = 10 + N-1 or (2 ) L = 10 + N-0.5? A) Learning curve (1 ) B) Learning curve (2 ) C) Curves (1 ) and (2 ) exhibit the same rate. D) We cannot determine the rate of cost reduction without knowing the value of N.