Suppose there are two firms on a river and the production processes of both require clean water. The upstream firm's process dirties the water, which it dumps back into the river. The downstream firm must clean the water before using it in its production
process. If the two firms would merge
A) the external costs of the merged firm would equal the external costs of the upstream firm, which would then be passed on to its customers.
B) the total costs of production fall since the external costs disappear.
C) the external costs of the upstream firm are private costs after the merger.
D) the internal costs of the downstream firm become external costs of the merged firm.
Answer: C
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When a firm's average revenue falls, the marginal revenue also falls and is less than the average revenue
a. True b. False Indicate whether the statement is true or false
When production increases, the average variable cost and average total cost curves:
A. cross. B. move closer together. C. become horizontal. D. spread farther apart.
Refer to the information provided in Figure 34.1 below to answer the question(s) that follow.
Figure 34.1Refer to Figure 34.1. The open economy multiplier is
A. 1.25. B. 2. C. 4. D. 8.
Compared to a perfectly competitive industry, a single-price monopoly produces
A) more output. B) less output. C) the same output. D) some amount that might be more, less, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. E) some amount that might be more, less, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.