Suppose there are two firms on a river and the production processes of both require clean water. The upstream firm's process dirties the water, which it dumps back into the river
The downstream firm must clean the water before using it in its production process. If the two firms would merge A) the external costs of the merged firm would equal the external costs of the upstream firm, which would then be passed on to its customers.
B) the total costs of production fall since the external costs disappear.
C) the external costs of the upstream firm are private costs after the merger.
D) the internal costs of the downstream firm become external costs of the merged firm.
C
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If the elasticity of demand for the latest American Idol album is 1.4, this means
A. few substitutes for the American Idol album exist. B. a 10% decrease in the price leads to a 140% increase in quantity demanded. C. a 5% increase in the price leads to a 7% decrease in quantity demanded. D. a 1% increase in the price leads to a 14% decrease in quantity demanded.
If the actual capital-labor ratio is below the steady-state capital labor ratio, growth from convergence will be ________, and the economy will grow ________ than it will along a balanced growth path
A) negative; slower B) negative; faster C) positive; slower D) positive; faster
Which of the following was a lesson from the 2007-2009 financial crisis?
a. The financial system needed more leverage in order to operate. b. The job of stabilizing the economy should be assigned exclusively to monetary policy. c. Monetary policy is finished once the Fed reduces the federal funds rate to zero. d. The business cycle still exists.
In case of a backward-bending labor supply curve:
a. the income effect of a higher wage offsets the substitution effect. b. the substitution effect of a higher wage offsets income effect. c. the substitution effect of a higher wage equals income effect. d. there is no income effect at a higher wage rate.