When positive externalities exist, the government must _________ the production of the good generating the externalities in order to achieve ___________
a. allow the market to dictate; a socially optimal allocation of resources
b. tax; a socially optimal allocation of resources
c. subsidize; a socially optimal allocation of resources
d. subsidize; market equilibrium
e. tax; market equilibrium
C
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If your demand for a good is ________, then a 1 percent fall in its price will lead you to ________ your expenditures on the good
A) inelastic; increase B) inelastic; decrease C) elastic; increase D) elastic; decrease
Moving down a straight-line demand curve, the absolute price elasticity of demand
A) increases. B) is constant. C) decreases. D) varies in uncertain ways.
Songwriters and composers press music companies to lower the price for music downloads because
a. demand for on-line music is inelastic b. profits are maximized where price elasticity of demand is -1.0 c. songwriter royalties are a percentage of sales revenue d. profits and total revenue are maximized at different quantities e. profits are maximized at the same prices as sales revenue
Define the following terms and explain their importance to the study of economics. a. Principle of marginal productivity b. Marginal physical product c. Marginal revenue product d. Derived demand e. Economic rent
What will be an ideal response?