There are 500 families in a neighborhood that are affected by air pollution from a local factory. The pollution is within legal limits, but could be reduced further if the company spent $10,000 on upgraded ventilators. The company agrees to install the ventilators if the affected families contribute the $10,000. A committee starts to collect donations to pay for the ventilators. Which of the following is most likely to occur?
A. Even if the families raise $10,000, the firm will not reduce its air pollution since it is within legal limits.
B. Because each individual contribution is so small and individuals will benefit from the reduction in air pollution whether they contribute or not, most people will not contribute and the firm will not upgrade the ventilators.
C. Because there are relatively few families involved and the individual contribution is so small, all families will voluntarily contribute.
D. The courts will force the firm to spend the $10,000 regardless of whether or not the families contribute the money.
Answer: B
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A successful advertising campaign would likely
a. increase price elasticity of demand by stressing the uniqueness of the product b. reduce price elasticity of demand by stressing the uniqueness of the product c. reduce price elasticity of demand by informing consumers of the availability of substitutes d. not alter the demand curve e. generally make the demand curve shift inward
If land is reallocated or switched from agricultural use to recreational use, then it is likely that
A. the demand curve for land in the agricultural industry is shifting to the right. B. the demand for food is less today than in previous decades. C. food is not as important as recreation. D. land earns a higher rent in recreational use than in agricultural use.
The monopolistically competitive firm's economic profits tend toward zero in the long run. Why is this so?
A. If a monopolistically competitive firm is profitable for more than 2 years, the Justice Department orders a corporate restructuring to pull the company back to a normal rate of return. B. Monopolistically competitive firm's are rarely able to maintain the corporate discipline necessary to sustain profits in the long run. C. In the long run, other firms will successfully offer substitutes for the profitable firm's product, and competition will eliminate economic profits. D. Even though the monopolistically competitive firm can successfully maintain barriers to entry, keeping competition at bay becomes very expensive.
A firm that wants to maximize profits should hire each input to the point where
A) its marginal revenue product divided by the price of the input equals one. B) its marginal revenue product divided by its marginal physical product equals the wage. C) its marginal revenue product divided by the product price equals one. D) its marginal physical product divided by the price of the input equals the product price.