In perfect competition, environmental externalities need not distort the allocation of resources providing
a. transactions costs are zero.
b. average costs are constant for all output levels.
c. firms install pollution control equipment.
d. the government sets realistic pollution standards.
a
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Define the nominal wage rate and the real wage rate. Can the nominal wage rate increase faster than the real wage rate?
What will be an ideal response?
In the long-run, a firm in monopolistic competition produces an amount of output that sets
A) P > ATC and MR = MC. B) P > ATC and MR > MC. C) P = ATC and MR = MC. D) P = ATC and MR > MC.
Sketch a perfectly competitive firm operating in short-run equilibrium but making economic losses. Put in all the functions necessary to show that the firm should stay in business in the short-run despite the losses. Shade in the area of loss shown by the drawing.
What will be an ideal response?
How would a new excise tax affect the supply curve?
(A) It would probably cause the supply curve to shift to the left. (B) It would probably cause the supply curve to shift to the right. (C) The effect cannot be determined without knowing the amount of the tax. (D) It would not change the supply curve, because it would only move price.