Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then
a. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked.
b. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked.
c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked.
d. There is not enough information to answer the question.
b
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The capture theory holds that regulations are supplied to maximize ________
A) total sales B) economic profit C) marginal product D) consumer surplus
Refer to Figure 7-2. At the efficient equilibrium
A) economic surplus is zero. B) economic surplus is negative. C) economic surplus is minimized. D) economic surplus is maximized.
Corporations have the advantage of
a. double taxation. b. limited liability of the stockholders. c. no taxes. d. limited life.
If the equilibrium price of natural gas is $4 per thousand cubic feet and a price ceiling is imposed at $3 per thousand cubic feet, the result will be:
a. a surplus of natural gas. b. a shortage of natural gas. c. an accumulation of inventories of unsold gas. d. None of these.