Which of the following is an example of a negative externality?
A. A Japanese company begins to produce cars and earns large profits.
B. An employee of a chemical company spills acid on his arm, causing severe damage.
C. John plants fruit trees in his front yard, which attracts bees, which sting neighbor Mary.
D. Sally buys coffee at McDonald's, spills some on her, and burns her arm.
Answer: C
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A monopoly firm expands its output and lowers its price. The firm finds that its total revenue falls. Hence, the firm is producing in the
A) elastic range of its demand curve. B) inelastic range of its demand curve. C) elastic range of its supply curve. D) inelastic range of its supply curve.
The learning curve indicates that
A) economies of scale are taking effect. B) repetition of various production tasks cause unit costs to decrease. C) workers must learn new skills in order to improve. D) it takes time to learn a new skill.
A monopolist faces the (inverse) demand for its product: p = a - bQ. The monopolist has a marginal cost given by c and a fixed cost given by F
a. Assume that F is sufficiently small such that the monopolist produces a strictly positive level of output. What is the profit-maximizing price and quantity? b. Compute the maximum profit for the monopolist. c. For what values of F will the monopolist earn negative profit?
The Federal Deposit Insurance Corporation (FDIC) insures the total value of all deposits in banks that are members of the Fed
a. True b. False Indicate whether the statement is true or false