Refer to the information in Figure 16.5 below to answer the question(s) that follow.
?Figure 16.5Figure 16.5 shows the marginal benefits of emitting pollution for the only two chemical companies in an industry, Alpha Chemicals and Beta Chemicals. Before any tax on pollution emissions is imposed, each company views pollution as being free.Refer to Figure 16.5. The government decides to impose a tax on pollution emissions to cut total emissions in this industry in half, and based on this decision it has set the tax at $100 per ton of emissions. Following the implementation of this tax, Beta will reduce its emissions to ________ tons.
A. 25
B. 50
C. 75
D. 100
Answer: C
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A perfectly competitive firm is earning an economic profit when total fixed costs increase. Assuming the firm does not shut down, in the short run the firm will
A) charge a higher price. B) produce more output so the extra revenue will cover the increased costs. C) produce less output to decrease total costs. D) continue producing the same quantity as before but will make less economic profit. E) continue producing the same quantity as before and continue making the same economic profit as before.
Mike wants to open his own repair shop, and is considering using his savings of $30,000 to get it started. He is currently earning 3 percent interest on his savings. His friend Bob calls him and asks to borrow $30,000 to start up a bagel shop; Bob offers to pay him 5 percent interest if he loans him the money. If Mike were to use the money to open his own repair shop, how can he accurately account for his costs?
A. Mike must consider the $900 in forgone interest on his savings as an implicit cost. B. Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an implicit cost. C. Mike must consider the $900 in forgone interest on his savings as an explicit cost. D. Mike must consider the $1,500 in forgone interest from loaning the money to Bob as an explicit cost.
Joe the Economist tells his wife, Jane, that he wants to spend a weekend fishing with his friends. She replies, "You don't love me anymore." Just before she hits Joe with a croquet mallet, Joe explains to her that she has confused the concepts of
a. marginal utility and price b. income and price c. marginal utility and total utility d. love and death e. consumer surplus and utility
An externality is defined as
a. the revenue generated by a firm in the external market b. a byproduct of a good or activity that affects someone not immediately involved in the transaction c. an additional cost of consumption that is borne by a third party d. a cost or benefit arising from price changes e. the value of a good or service to a consumer