What can we do to deal with the externalities associated with public goods and common resources?
a) Private markets will lead to an efficient allocation of resources.
b) Government intervention can potentially raise economic well-being.
c) Private markets will correct for the gain or loss to consumer surplus.
d) Government intervention can completely eliminate the free-rider problem.
Ans: b) Government intervention can potentially raise economic well-being.
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Use the following graph to answer the next question.
The graph shows the cost curves for a perfectly competitive firm. If the market price of the product is $1.25 per unit,then the firm will earn how much in profits/losses in the short run?
A. $25 B. $9 C. -$9 D. -$12
A risk-neutral monopoly must set output before it knows the market price. There is a 50 percent chance the firm's demand curve will be P = 20 ? Q and a 50 percent chance it will be P = 40 ? Q. The marginal cost of the firm is MC = Q. The expected profit-maximizing quantity is:
A. 15. B. 20. C. 5. D. 10.
Which one of the following colonial groups actually benefited from the Navigation Acts?
a. Southern tobacco farmers b. New England shipbuilders c. colonists who bought goods imported from non-imperial sources d. No colonial group benefited from the Navigation Acts.
Suppose someone offers Max the following gamble: with probability 0.50 he will win $10 and with probability 0.50 he will lose $8. The expected value of this gamble is:
A. $1. B. $2. C. $0. D. $5.