A pollution tax allows a firm to externalize some of its internal costs.
Answer the following statement true (T) or false (F)
False
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The total variable cost curve ________ because ________ as output increases
A) slopes upward; variable cost increases B) slopes upward; marginal cost increases C) slopes downward; variable cost increases D) slopes downward; marginal cost increases E) is horizontal; fixed cost does not change
John is an athlete. He has $120 to spend and wants to buy either a heart rate monitor or new running shoes. Both the heart rate monitor and running shoes cost $120, so he can only buy one. This illustrates the principle that
a. trade can make everyone better off. b. people face trade-offs. c. rational people think at the margin. d. people respond to incentives.
Suppose that an early frost damages the California orange crop. As a result, the price of Texas oranges increases. Ceteris paribus, which one of the following statements best explains this situation?
A. The demand for California oranges fell because of the freeze, and this led to a higher demand for Texas oranges. B. The supply of California oranges decreased, causing the supply of Texas oranges to increase, which resulted in a higher price. C. The supply of California oranges decreased, causing the supply of Texas oranges to decrease, which resulted in a higher price. D. The supply of California oranges decreased, causing their price to increase, and thus causing the demand for Texas oranges to increase.
Refer to the information provided in Figure 12.3 below to answer the question(s) that follow. 
Figure 12.3
Refer to Figure 12.3. The DVD industry is a constant-cost industry. As the demand for DVD players shifts from D to D', which of the following is least likely to result?
A. If the market for DVD players is competitive, the price will increase to $5.00 in the short and long run. B. More resources will be allocated to produce DVD players. C. The demand for DVDs will increase. D. If the market for DVD players is perfectly competitive, economic profits in this industry will increase in the short run, but will fall back to zero in the long run.