You are the mayor of your home town, and one day you arrive at city hall to find angry voters demonstrating against you. They are mad because your office created a garbage-collection monopoly by awarding only one company a permit to collect garbage in
your town. The voters claim that the company is overcharging and providing poor service. They want you to do something that will lower rates and improve service. You call your staff economist, who presents evidence that there are substantial increasing economies of scale to garbage collection. What are your options if you are interested in efficiency?
Since there are substantial increasing economies of scale, you would not want to allow more companies to
enter and you would not want to split up the existing company. You can either regulate the monopoly, or
put the city in charge of garbage collection (either by buying out the monopoly, or by revoking its permit
and taking over garbage collection).
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A. trade-offs. B. opportunity costs. C. scarcity of resources. D. All of the responses are correct.
Use the idea of external costs to explain why some cities have laws against late-night rock concerts
What will be an ideal response?
Covered interest arbitrage ensures
A) exchange parity. B) purchasing power parity. C) interest parity. D) All of the above.
A 10 percent increase in the price of wireless earbuds leads to a 5 percent decrease in the quantity demanded of wireless earbuds. The absolute price elasticity of demand is
A. 2. B. 0.33. C. 3. D. 0.5.