Sketch graph a natural monopoly like a city transportation subway with the typical ATC, MC, and demand and MR functionsA. Label the profit maximizing monopoly price with a P1.B. Label the typical public utility commission regulated price which requires no subsidy as P2.C. Label the socially efficient price as P3.D. Shade in the area of the subsidy required in one of the cases above.E. Explain why a subsidy is often used for public transportation but not for municipal water supply.
What will be an ideal response?
Public transportation has many positive externalities because when you ride the train, I have less traffic to deal with on the highways. Because I otherwise would not pay for this benefit, a tax assessed to me and given to the transportation company will help bring a more efficient allocation of transportation resources. If you use more water, I am not benefited in any meaningful way. See graph below.
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For economic purposes in the United States, the working-age population does not include:
A. anyone in the military. B. someone who is 16 and does not want to work. C. someone who is 65. D. anyone without a driver’s license.
A firm in perfect competition perceives the demand curve to be downward sloping
Indicate whether the statement is true or false
The Full Employment Act of 1946 was based on the ideas associated with the
a. classical school b. Keynesian school c. rational expectations school d. supply-side school e. monetarist school
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, as the economy moves from Point A to Point E, the opportunity cost of motorcycles, measured in terms of hybrid cars
A. remains constant. B. decreases. C. initially increases, then decreases. D. increases.