Which of the following represents why private production tends to be more efficient then government production?
What will be an ideal response?
a. Private companies face a profit motive that keeps them operating efficiently, government bureaucracies use taxpayer money and, therefore, do not face this profit motive.
c. Politicians have a strong incentive to support projects that have immediate and easily recognized benefits and distant and unidentifiable costs, even if the total costs outweigh the total benefits.
d. Politicians have a strong incentive to support programs where the benefits are highly concentrated on special interest groups and the costs are widely dispersed among voters, even if the total costs outweigh the benefits.
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Refer to the above figure. Which of the following statements is TRUE?
A) Under perfect competition, the efficient price is charged, which is the lowest price possible (P1 ) while under monopoly output is too large (Q4 ) and price is too high (P4 ). B) Under perfect competition price equals marginal cost (P3 ) while under monopoly price (P4 ) is greater than marginal cost (P1 ). C) The rate of output is the same under both monopoly and perfect competition (Q1 ), but price is higher under monopoly (P4 rather than P1 ). D) Price equals marginal cost under both monopoly and perfect competition, but output is too low under monopoly (Q1 instead of Q2 ).
Banks considered "too big to fail" were:
A. bailed out through fiscal policy. B. bailed out through consumer spending. C. allowed to go bankrupt. D. helped by fiscal policy, but eventually went bankrupt.
Graphically the intersection of the aggregate demand curve, the short-run and long-run aggregate supply curves determines:
A. the recessionary gap. B. long-run equilibrium. C. the expansionary gap. D. short-run equilibrium.
Two firms, Acme and FirmCo, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Process(smoke/day) A(10 tons/day) B(8 tons/day) C(6 tons/day) D(4 ton/day) E(2 tons/day) Cost to Acme ($/day) $750$800$1,000$1,400$2,000 Cost to FirmCo ($/day) $500$750$1,200$2,200 $4,000Suppose the firms are both currently using process A. If the government requires each firm to reduce pollution by 20%, then the total cost to society of this policy will be ________ per day.
A. $1,550 B. $2,350 C. $950 D. $300