Suppose the market for oranges is perfectly competitive and unregulated. Suppose also that the chemicals used to keep the oranges insect-free damage the environment by an estimated $1 per bushel of oranges. Suppose QD = 1000 - 100P and QS = -100 + 100P. If regulators limited production to 200 bushels, the deadweight loss relative to the option of setting the optimal tax would be would be
a. $0
b. $200
c. $500
d. $1000
c
You might also like to view...
The price elasticity of demand is equal to the ________ in the ________ divided by the ________ in the ________
A) percentage change; price; percentage change; quantity demanded B) change; price; change; quantity demanded C) percentage change; quantity demanded; percentage change; price D) change; quantity demanded; change; price
Which of the following is true about the Federal Reserve and its ability to prevent recessions? The Federal Reserve
A) can fine tune the economy and realistically hope to keep the economy from experiencing recessions. B) cannot realistically fine tune the economy and has little to no effect on the magnitude and length of recessions. C) cannot realistically fine tune the economy, but seeks to keep recessions shorter and milder than they would otherwise be. D) does not try to eliminate recessions, but instead focuses on preventing inflation.
The telephone is an example of a product with network externalities
What will be an ideal response?
In the simple circular flow model of the economy, total expenditures on goods and services equal total household income
a. True b. False Indicate whether the statement is true or false