When less than the efficient amount of a good is produced, how does the marginal social benefit of the last unit produced compare to its marginal social cost?
What will be an ideal response?
When less than the efficient amount of a good is produced, the marginal social benefit of the last unit produced exceeds its marginal social cost. The fact that the marginal social benefit exceeds the marginal social cost indicates that producing additional units of the good will move the amount of production closer to the efficient quantity.
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Why do private markets tend to undersupply nonrivalrous goods?
a. Because free riders will refuse to pay for these goods. b. Because the tragedy of the commons will reduce their value to zero. c. Because people have an incentive to understate their preferences for these goods. d. Because the efficient price for these goods is zero.
Price discrimination, where different units of a good are sold for different prices
A) is impossible because there can only be one market price. B) can be effectively practiced by all monopolists. C) maximizes consumer welfare because each consumer pays only the price he or she is willing to pay. D) is possible if the good cannot be resold.
The tax with the minimum excess burden of taxation is most desirable from an efficiency standpoint because _____
a. it suggest that people substituted away from the tax by a considerable amount b. it minimizes tax shifting c. it produces the least social cost per dollar of revenue raised d. it will raise the most revenue for government
In a perfectly competitive industry, influence over price is exerted by: a. individual sellers
b. individual buyers. c. the largest firms. d. the forces of market supply and demand.