Which of the following illustrates the principle of second best?
A. A tax imposed on land, because this tax distorts economic decisions less than taxes on other factors of production.
B. The government imposes a tax on a paper manufacturer that equals the cost of cleaning the river damaged by the waste discharged into the river by the paper manufacturer.
C. The government decides to impose taxes on all grains, rather than imposing a tax only on wheat.
D. The government imposes taxes on gasoline, and the tax revenue collected is used to pay for road repair.
Answer: B
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How can a monopolist identify the profit-maximizing level of output if it knows its marginal revenue and marginal costs?
A. The profit-maximizing level of output will be where marginal cost is greatest over marginal revenue B. The profit-maximizing level of output will be where marginal revenue is greatest over marginal cost C. The profit-maximizing level of output will be where marginal revenue intersects marginal cost D. Cannot be determined
If Bonnie can produce either 10 hats or 20 scarves in a month, and Phil can produce either 5 hats or 10 scarves in a month then
A) Bonnie is more efficient at producing hats, compared to Phil. B) Bonnie is more efficient at producing scarves, compared to Phil. C) both A and B above are true. D) none of the above is true.
If marginal revenue equals zero, then demand at this level of output is
A) perfectly inelastic. B) inelastic. C) unit elastic. D) elastic.
The planning horizon is the
A. point where production begins. B. short run. C. long run. D. point where diminishing marginal product starts.