100b final
Use the following statements to answer this question. I. The bubble concept allows an emitter to sum emission limits for all sources of pollutants within a particular firm, and to set emissions reductions from each source as it pleases as long as the total pollutant limit at the plant is not exceeded. II. Under an emissions offsets program, a new source of emissions can locate in a region only if their new emissions are accompanied by reduced emissions from existing sources by at least as much.
Both I and II are true
Which of the following is a public good?
Broadcast TV
What does the negative slope of the production possibilities frontier imply?
Diminishing marginal rates of technical substitution
What can account for the negative slope of the marginal revenue product curve?
Diminishing marginal returns
Use the following statements to answer this question: I. Under profit maximization, the quantity of labor used in production is optimal if MR = w/MPL. II. The expression MR = w/MPL implies that the revenue earned from the last unit of output produced equals the marginal cost of the last unit of output.
I and II are true.
Use the following statements to answer this question: I. The first theorem of welfare economics refers to efficient allocation of goods across groups of consumers, and it does not consider the problem of efficient production of these goods. II. The only way to achieve an efficient allocation of goods is to use competitive markets.
I is true and II is false
Use the following statements to answer this question: I. The efficient amount of recycling of scrap materials is the amount that equates the marginal social cost of scrap disposal to the marginal cost of recycling. II. The efficient amount of recycling of scrap materials occurs when society recycles all recyclable wastes.
I is true, and II is false.
Under what circumstances will the economic rent earned by a factor of production always be zero?
Infinitely elastic supply curve
Which of the following is a negative externality connected to attending college?
The fact that the people in the next room play loud music at hours you want to sleep.
Given that MEC(q) = 2q2, what can be inferred about the total cost of pollution as output increases?
The total cost of pollution is growing at an increasing rate.
The main point of the second theorem of welfare economics is that:
any equitable outcome can be achieved by reallocating the resources among the members of a society.
Under an infinitely inelastic supply of land, the economic rents to land __________ if the price of land doubles.
double
To enforce the optimum level of emissions a government could set an emissions standard at the quantity
where the MSB curve crosses the MCA curve.
If only one firm in an industry could take advantage of a reduced wage and all other firms continue paying the old wage, how would one best describe one firm's reaction to this reduced wage assuming labor is the only variable input? The marginal revenue product of labor curve
would remain unchanged, and the firm would hire more labor at the lower wage.
The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is at its maximum and equals 30. The marginal revenue product of labor is $300. The price of its output
$10
The Acme Company is a perfect competitor in its input markets and its output market. Its average product of labor is 30, the marginal product of labor is 20, the price of labor is $20, and the price of the output is $5. For Acme Company, the marginal revenue product of labor is
$100
Suppose the local market for legal services has an upward sloping supply curve, P L = 150 + 0.0001QL where PL is the price of legal services and QL is the number of hours of legal services. If the equilibrium price of legal services is $250 per hour and the average number of hours that a lawyer works per year is 2,500, what is the average economic rent earned per lawyer in this market?
$20,000
Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what is the marginal product of capital at the new optimal level of input usage?
133 units
Suppose the local market for legal services has an upward sloping supply curve, P L = 150 + 0.0001QL where PL is the price of legal services and QL is the number of hours of legal services. If the equilibrium price of legal services is $250 per hour, what is the aggregate economic rent earned by lawyers in this market?
50 milly dolla
Scenario 16.3: Continue to use the data from Scenario 2 but consider the case when the goods are redistributed such that Sam has 4 tee shirts and 4 candies. Sally has 3 tee shirts and 3 candies. Refer to Scenario 16.3. What is Samʹs marginal rate of substitution of tee shirts for candy at the current distribution?
7/5
Scenario 16.3: Continue to use the data from Scenario 2 but consider the case when the goods are redistributed such that Sam has 4 tee shirts and 4 candies. Sally has 3 tee shirts and 3 candies. Refer to Scenario 16.3. What is Sallyʹs marginal rate of substitution of tee shirts for candy at the current distribution?
9/4
The marginal benefit and marginal private cost curves for aphrodisiacs are given as follows: MB = 200 - Q MPC = Q In addition to private costs, there is a marginal external cost of $10 per unit of output. What is the efficient level of output?
95
Which of these is NOT an exercise in general equilibrium analysis?
A discussion of factors within the wheat market that influence wheat prices
Which of the following is true at the exchange equilibrium between two individuals?
A) Their marginal rates of substitution are equal. B) The slopes of the individualsʹ indifference curves are equal. C) Both individualsʹ marginal rates of substitution are equal to the ratio of the prices of the goods. Alla the above
What is TRUE about every point along a production possibilities frontier?
All allocations are efficient
The contract curve in an Edgeworth Box diagram illustrates
All possible efficient allocations of goods among individuals
Suppose a firm has one variable input, labor. Why is the MRPL curve for a competitive firm above the MRPL curve for a monopolist?
Although the marginal product of labor may be the same under both market structures, the marginal revenue of the monopoly declines with output
Let P be the output price for a particular good. Why is the value P*MPL greater than MRPL for a monopolist? A) The monopolist is not as technically efficient as firms operating under perfect competition. B) The monopolist hires less labor, so MPL is higher under a monopoly than under perfect competition. C) The monopolist sets a price that is higher than MR.
B and C are correct
When comparing point A, which lies within a utilities possibilities frontier, with point B, which lies on the same utilities possibilities frontier,
B is necessarily more efficient than A.
When comparing point A, which lies within a utilities possibilities frontier, with point B, which lies on the same utilities possibilities frontier,
B may be more equitable than A.
Which of the following is a negative externality connected to automobile transportation? A) Driving faster than the 65 mph speed limit is not allowed, even though individuals are able to do it, and many want to. B) In an accident, a person who chooses not to wear a seat belt becomes an object moving around the inside of the car, possibly hitting other, belted-in, passengers with lethal force. C) Gasoline is taxed on a per-gallon basis. D) Gasoline is imported, and thus increases the trade deficit. E) While stuck in traffic, you have a chance to listen to your favorite CD, which you havenʹt had the time to do in other places.
B) In an accident, a person who chooses not to wear a seat belt becomes an object moving around the inside of the car, possibly hitting other, belted-in, passengers with lethal force.
To be certain that exchange between people is mutually beneficial, we generally assume
B) all people have complete information about each otherʹs preferences. C) there are no transaction costs. both are true.
If a firm had a fixed proportions technology, then the pollution produced by this firm A) cannot be reduced. B) can be reduced only by lowering the level of output (holding technology constant). C) can be reduced by changing how the output is produced within the bounds of the existing technology. D) can be reduced only by increasing the number of firms in the industry. E) can be reduced only by changing the technology.
B) can be reduced only by lowering the level of output (holding technology constant).
The slope of the utility possibilities frontier is
B) negative.
Gasoline and bicycles are complements in consumption. Suppose we increase the federal gasoline tax to $1 per gallon. Initially, the gasoline price rises due to the tax, and the demand curve for bicycles shifts rightward because these goods are complements. What are the secondary changes that result from the gasoline tax as these markets adjust to a new general equilibrium?
Bicycle price rises, demand for gasoline shifts rightward.
When comparing point A, which lies within a utilities possibilities frontier, with point B, which lies on the same utilities possibilities frontier,
Both A and B may be equitable
What is TRUE about every point along a utilities possibilities frontier? A) Markets are perfectly competitive. B) It is possible to move to from one point on the frontier to another point and make everyone better off. C) All allocations are efficient. D) It includes some unattainable points.
C) All allocations are efficient
Canada produces MP3 players and lumber, and the horizontal axis for Canadaʹs production possibilities frontier represents the amount of lumber produced. Canadaʹs borders are not initially open to trade, and the country consumes along its production possibilities frontier where the MRT and MRS equal the price ratio for the two products ($200 per 1,000 board -feet of lumber versus $100 per MP3 player). If Canada opens its borders to trade with China at world prices for the two goods ($300 per 1,000 board-feet of lumber and $100 per MP3 player), what trade pattern develops for Canada?
Canada will export lumber and import MP3 players
An allocation in which one person can be made better off only by making someone else worse off is
Efficient
Why does perfect competition guarantee a Pareto optimal distribution of goods between two people? Under perfect competition,
Everyone faces the same prices
Which is NOT an advantage of emissions fees over standards?
Fees can reduce the cost of attaining some goal level of emissions when firms have different abatement costs and different standards can be assigned to different firms.
Gasoline and bicycles are complements in consumption. Suppose we increase the federal gasoline tax to $1 per gallon. What are the initial changes that result from the tax as these markets adjust to a new general equilibrium?
Gasoline price rises, demand for bicycles shifts rightward.
The markets for movie theater tickets and videocassette rentals are highly interdependent. Suppose that a tax is imposed on movie theater tickets. The type of analysis that examines the effects of this tax on the markets for movie theater tickets and videocassettes simultaneously is called
General Equilibrium Analysis
Which is NOT a weakness of the policy of mandatory separation of recyclables?
It actually pays people to use more recyclable material, and thus more material in total.
If the initial distribution of labor and capital is Pareto optimal, which of the following statements is TRUE?
It is possible to reallocate labor and capital across industries so as to increase the production of one good, but only by reducing the production of another good.
If the initial distribution of two goods between two people is Pareto optimal, which of the following statements is TRUE?
It is possible to reallocate the goods between the two people so as to increase the utility of one person, but only at the expense of the other person.
Which of the following is NOT true about the supply of labor to the firm in a competitive labor market?
It is upward sloping
What happens to the marginal revenue product curve of a factor as more of a complementary factor is hired?
It shifts to the right, because its marginal product increases.
The Acme company is a perfect competitor in its input markets and a monopolist in its output market. The marginal product for labor is 20 and the price of Acme's output is $10. For Acme Company, the marginal revenue product of labor is
Less than $200
Other things being equal, the marginal revenue product (MRP) curve for a competitive seller
Lies above the MRP curve for a monopolist
the marginal revenue product of labor is equal to
MPL * MR
The the competitive output market for good Q, the marginal revenue product for an input X can be expressed as
MPx * Pq
If the market for labor is perfectly competitive, the profit maximizing level of labor occurs where
MRPL = W
Suppose a competitive industry produces output, Q, using some input, i, where the price of the output is PQ and the input price is Pi. Efficient use of resources requires that
MRPi=Pi.
A competitive equilibrium is efficient in the production and exchange of two goods X and Y when
MRSxy = MRTxy.
An economy produces outputs X and Y using inputs L and K. Which of the following is NOT required for economic efficiency?
MRTS LK = MRS XY for all producers and consumers.
In an economy which produces two goods X and Y, using two inputs L and K, efficient input use occurs when
MRTS LK^X = MRTS LK^Y
Assume that labor and capital are complements in production and that the wage declines. Which of the following statements best describes the adjustment in the use of labor?
More labor is used both because of the reduced wage and increased use of capital.
Scenario 16.3: Continue to use the data from Scenario 2 but consider the case when the goods are redistributed such that Sam has 4 tee shirts and 4 candies. Sally has 3 tee shirts and 3 candies. Refer to Scenario 16.3. Is the current distribution Pareto optimal?
No, as it is possible to find a way for Sam to sell tee shirts to Sally (and receive candy in return) that would make both of them better off.
Suppose there is a water shortage, and the governor proposes that the government distribute equal quantities of water to each person at no cost to the consumers. If consumers were forbidden to trade water, would such a distribution be Pareto optimal?
Not necessarily, as people may differ in their marginal rates of substitution between water and other goods.
Which of the following is NOT an example of a common property resource?
Outdoor concerts
All producers in the corbomite industry dump wastes in the river in the production of their output. 10) Given the information in Figure 18.1, the competitive output in the corbomite industry is:
Q1
Given the information in Figure 18.1, the efficient output in the corbomite industry is:
Q2
Scenario 16.1: Irrespective of the amount of cheese doodles and pretzels that Sam consumes, his marginal rate of substitution of cheese doodles for pretzels is 2. Also, irrespective of the amount of cheese doodles and pretzels that Sally consumes, her marginal rate of substitution of cheese doodles for pretzels is 3. Refer to Scenario 16.1. Suppose instead that Sam is initially allocated 3 cheese doodles and 3 pretzels, whereas Sally is initially allocated 6 cheese doodles and 10 pretzels. Which of the following statements is TRUE?
The allocation is not Pareto optimal as Sally would be willing to exchange two pretzels for one cheese doodle and be better off, without making Sam worse off.
Scenario 16.1: Irrespective of the amount of cheese doodles and pretzels that Sam consumes, his marginal rate of substitution of cheese doodles for pretzels is 2. Also, irrespective of the amount of cheese doodles and pretzels that Sally consumes, her marginal rate of substitution of cheese doodles for pretzels is 3. 9) Refer to Scenario 16.1. Initially Sam and Sally are allocated 10 cheese doodles and 10 pretzels each. Which of the following statements are TRUE?
The allocation is not Pareto optimal. An allocation that gave Sam all of the cheese doodles and Sally all of the pretzels would make both of them better off.
Which of the following is a condition for efficiency in the output market?
The marginal rate of transformation must equal the marginal rate of substitution.
What does the negative slope of the utilities possibilities frontier imply?
The only way to increase one personʹs utility is to decrease another personʹs utility.
Gasoline and bicycles are complements in consumption. Suppose we increase the federal gasoline tax to $1 per gallon. Initially, the gasoline price rises due to the tax, and the demand curve for bicycles shifts rightward because these goods are complements. Then, the bicycle price rises, and the demand curve for gasoline shifts rightward. Assuming the general equilibrium is achieved in both markets after these two steps, which of the following statements is NOT true?
The price increase in gasoline is larger under the general equilibrium approach, but the change in the quantity of gasoline demanded is smaller than under partial equilibrium analysis.
Why is the production possibilities frontier concave to (bowed away from) the origin?
The shape of the curve is due to the marginal costs of producing the two goods. At high levels of output for a particular good, the marginal cost is very high, and the firm can use the same inputs to produce a relatively large quantity of the other good.
Suppose MRTS is not the same across all producers. In this case, the economic outcome is not fully efficient because:
The use of inputs in production is inefficient
Under what circumstances are the marginal expenditure for an input and the average expenditure always equal?
Where there is a competitive buyer
Access to the movie ʺCasablanca,ʺ showing in a half-empty theater, is
a non-rival good because when a new viewer enters the theater, there is not less of the movie for everybody else.
Loud music from a neighborʹs party is
a positive externality if you like the music, and a negative externality if you don't
Corn flakes are
a rival good because if another person wants some corn flakes society has to use additional resources to produce corn flakes for that person.
If error in setting the policy is possible,
a standard generates smaller welfare losses than a fee when the MSC is relatively steep and the MCA is relatively flat.
A positive externality is shown by a marginal social benefit (MSB) curve that is
above and to the right of the demand curve for the good that generates it.
In a problem involving exchange, the contract curve shows
all possible efficient allocations between both parties.
An increase in technology that enhances labor productivity will likely result in:
an increase in labor employment and an increase in the wage rate.
All of the payment to a factor of production will be economic rent when the factor of production has:
an infinitely inelastic supply curve.
Because of the kind of externalities that tend to be generated from general R&D resources bought by firms, the equilibrium price of R&D
and quantity of R&D are both below the optimal level.
Due to externalities generated by home landscaping, its price
and quantity traded are both below optimal level
For an individual consumer, a corner solution may be optimal such that MRS and MRT are not equal,
and this may also occur in an Edgeworth Box.
Left alone, with no government interference, a profit-maximizing firm will produce emissions
at the horizontal intercept of the MCA curve.
Transferable permits allow emission reduction to be achieved
at the lowest possible cost.
The presence of pollution in the trucking industry leads in the long run to dynamic inefficiencies because
average private cost in trucking is lower than average social cost, so that some trucking firms remain in the industry (or are induced to enter) when efficiency calls for them to leave (or stay out).
If the MSB/MCA graph indicates that an emissions fee of $10 per unit would lead to the optimum level of emissions, but the government set a fee of $5 per unit, emissions would
be above the optimum level, but curtailed somewhat from what they would have been with no fee at all.
Suppose the labor market is perfectly competitive, but the output market is not. When the labor market is in equilibrium, the wage rate will:
be less than price times the marginal product of labor
A lighthouse is a public good
because it doesnʹt cost any more to light the way for 105 ships than it does to light the way for 104 ships, but for no other reason. Because there is no way to prevent those who havenʹt contributed to the lighthouse from seeing better because of it, but for no other reason.
Use the following statements to answer this question: I. Following the properties of indifference curves, the utility possibilities frontier should be convex to (bowed into toward) the origin. II. The slope of the utility possibilities frontier equals -1 times the slope of the contract curve.
both are false
The firm purchases a factor of production in a competitive market. At the current purchase rate the MRP of the factor is greater than the marginal expenditure for the factor. Thus, the firm
can increase profit by expanding the employment of the factor of production.
The marginal product of labor for Acme, Inc is 15. The average product of labor is 25, and the price of labor is $10. Assume that Acme, Inc. is a competitor in its output and input markets, the marginal revenue product of labor:
cannot be determined with information provided.
The Acme company is a perfect competitor in its input markets and a monopolist in its output market. Its average product of labor is 30, the marginal product for labor is 20, the price of labor is $20, and the price of the output is $5. For Acme company, the marginal revenue product of labor is
cannot be determined with the information provided.
Suppose the supply of land is infinitely inelastic and the demand for land is downward sloping but inelastic at the current equilibrium. If the supply curve shifts rightward (e.g., previously unusable land is cleared for production), what happens to the aggregate economic rents in this market?
decrease
Suppose an economy produces milk and honey, and milk is plotted along the horizontal axis of the production possibilities frontier. If the production in the economy is centrally planned (and not market oriented) so that the MRS for the current production level is 3 but the MRT is 2, then there will be an excess __________ for milk and an excess __________ for honey.
demand, supply
When emissions are measured on the horizontal axis, the marginal cost of abating emissions is
downward-sloping because a high level of emissions is cheap to attain, and a low level of emissions is expensive to attain.
Locating a point on a utilities possibilities frontier gives you information about
efficiency but not equity
If X transferable emissions permits are issued and there are n potential polluters,
emissions will be the same no matter who receives them first, so long as the recipient is willing and able to participate in the permit market.
When new technologies make cleaner production possible,
emissions would fall under a system of fees, but would not fall under a system of transferable emissions permits unless the government bought back some of the permits.
Which of the following move the handling of a common property resource closest to efficiency?
ensuring that the seller of the resource is a monopolist
Suppose the labor market and all output markets are perfectly competitive. When the labor market is in equilibrium, the wage rate will:
equal the marginal revenue product of labor.
Suppose the labor market is perfectly competitive, but the output market is not. When the labor market is in equilibrium, the wage rate will:
equal the marginal revenue product of labor.
In a competitive labor market, with one variable factor, the supply of labor to the firm is
equal to the marginal expenditure curve
In equilibrium, the price of a transferable emissions permit
equals the marginal cost of abatement for all firms.
A firm should hire more labor when the marginal revenue product of labor
exceeds the wage rate
Suppose MRS is not the same across all consumers. In this case, the economic outcome is not fully efficient because:
exchange is inefficient
The provision of an education in public school is
exclusive and rival
General equilibrium analysis is different from partial equilibrium analysis in that general equilibrium analysis
explicitly takes feedback effects into account and partial equilibrium analysis does not.
The presence of pollution in the dry cleaning industry leads in the long run to dynamic inefficiencies because
firms whose average private cost is less than price will stay in (or enter) the dry cleaning industry even though their average social cost exceeds price.
A consumer or producer who does not pay for use of a nonexclusive good but expects others to pay is known as a:
free rider
The United States and Brazil are competitors in the world soybean market. In the late 1960s and early 1970s, the Brazilian government developed regulations designed to encourage Brazilian soybean production and exports. An unanticipated effect of the Brazilian regulations was to stimulate U.S. soybean production and exports. The type of economic analysis that would explain and predict these effects is called
general equilibrium analysis.
A firm will avoid producing additional emissions whenever the fee is
greater than the MCA.
the industry demand curve for labor is the
horizontal sum of individual firm labor demand curves
If households pay a fixed annual fee for trash disposal,
households have no incentive to cut back on the amount of garbage they generate.
When the factor market is purely competitive, the firm's average expenditure curve for a factor of production is
identical to the marginal expenditure curve.
Scenario 16.3: Continue to use the data from Scenario 2 but consider the case when the goods are redistributed such that Sam has 4 tee shirts and 4 candies. Sally has 3 tee shirts and 3 candies. Refer to Scenario 16.3. What is the relative price of tee shirts to candy?
impossible to determine
Under an upward sloping supply curve for land, the economic rents to land __________ as the demand for land shifts rightward.
increase
The substitution effect of a decrease in the wage will
increase leisure, regardless of whether leisure is a normal good or inferior good
If leisure is a normal good, then the income effect of a decrease in wage will
increase the number of hours worked
For some fisheries in the U.S., the state or federal government imposes ʺgear restrictionsʺ that limit the size of boats, nets, or other equipment that may be used to harvest the fish in a given body of water. The purpose of the gear restrictions is to:
increase the private cost of using the resource so that the private cost is closer to the marginal social cost.
Suppose labor and capital are variable inputs. The wage rate is $20 per hour, the marginal product of labor is 30 units, the rental rate of capital is $100 per machine hour, and the marginal product of capital is 150 units. If the wage rate declines to $15 per hour, the firm employs more labor and the marginal product of labor declines to 20 units. Assuming the rental rate of capital remains the same, what happens to the amount of capital used by the firm?
increases
Suppose the private marginal cost of pumping water from an aquifer remains constant as the quantity of water pumped increases, and the marginal social cost is upward sloping. If the demand for water shifts to the right as population increases, then the amount of water pumped based only on private costs __________ and the social cost of the common property resource __________.
increases, increases
The marginal revenue product can be expressed as the
increment to revenue received from one additional unit of input hired
All points within the production possibilities frontier are
inefficient
All points within the utilities possibilities frontier are
inefficient
Assume there are only two individuals in an economy, Lisa and Bart. The utility possibilities frontier for these individuals is given as: 120 = UL + UB where UL is Lisaʹs utility and UB is Bartʹs utility. Lisaʹs current level of utility is 20, Bartʹs level of utility is 90. This combination is:
inefficient
Because air cargo as an industry involves the generation of pollutants in engine exhaust, the equilibrium price of air cargo services
is below the optimal level, and quantity is above the optimal level.
Dry cleaning of clothing produces air pollutants. Therefore, in the market for dry cleaning services, the equilibrium price
is too low to be optimal, and equilibrium quantity is too high.
Under a transferable emissions permit system with n possible polluters, the government enforces the total amount of emissions allowable at X by
issuing X permits.
From a point within the utilities possibilities frontier,
it is possible to find another point within the frontier that generates higher utility for both people.
From any point within the production possibilities frontier,
it is possible to increase output of both goods
Once a point on a contract curve has been chosen,
it is possible to make one individual better off only at the expense of the other
Assume that as the wage rate rises a worker's substitution effect for leisure is larger than the income effect. We can conclude that in this region, the worker's
labor supply curve will have the usual upward slope.
One difficulty in managing common property resources is that
many common property resources are so vast that single ownership or management of them is not practical, especially if they cross international borders.
The efficient level of recycling equates the
marginal cost of scrap disposal to the marginal cost of recycling.
The Rawlsian view of equity would lead to:
maximizing the utility of the least-well-off person.
Majority-rule voting
may or may not be efficient, depending upon the preferences of the voters
When compared to the demand curve for only one variable input, the demand curve for a factor input when several inputs are variable is
more elastic
The slope of the production possibilities frontier is
negative
An efficient allocation of goods in an exchange economy means that
no one can be made better off without making somebody else worse off.
Access to the movie ʺCasablanca,ʺ showing in a half-empty theater, is
not a public good because it is an exclusive good
externalities are
not reflected in market prices, so they can be a source of economic inefficiency
The optimum level of pollution emissions
occurs where the marginal external cost equals the marginal cost of abatement.
A move from one point on a contract curve to another point on the contract curve will make
one individual better off and the other individual worse off
Common property resources tend to be
overused
Efficient voting outcomes would assign weights to each vote that are:
proportional to the voter's strength of preference
The government provides public education because
public education provides positive externalities
Having a refundable deposit for recyclable material
raises the marginal private cost of disposal.
Majority-rule voting
reflects the preferences of the median voter
Menellʹs study showed that in terms of effectiveness,
refundable deposits were best, followed by curbside charges and finally mandatory separation of recyclables.
Common property rights
result in faster depletion of resources than do individual property rights.
As you move rightward on a marginal cost of abatement curve, emissions are
rising, and the cost of eliminating the marginal unit falls.
If the firm is an industry that could take advantage of a reduced wage, how would one best describe the firms' demand for labor? The MRPL
schedule would remain unchanged, and the firms would hire more labor at the lowest wage.
To find the social marginal benefit of public goods, one needs to
sum the consumers' demand curves vertically
The condition that requires MRTS for each input pair to equal the ratio of their marginal costs is known as __________ efficiency, and the condition that requires MRS for each output pair to equal their output price ratio is known as __________ efficiency.
technical, output
All possible efficient allocations of 2 goods between 2 people are located on
the contract curve
To enforce the optimum level of emissions, a government could set an emissions fee, which would be
the dollar value indicated by the intersection of the MSB and MCA curves, and would apply to every unit of pollutants the firm emitted.
Under a transferable emissions permit system,
the firms with the lowest marginal abatement cost curves will reduce emissions most.
The statement: ʺIf everyone trades in the competitive marketplace, all mutually beneficial trades will be completed, and the resulting equilibrium allocation of resources will be economically efficient.ʺ is formally known as:
the first theorem of welfare economics.
If an individual's labor supply curve is backward bending, then
the income effect associated with a higher wage is greater than the substitution effect
Constructing plastic containers produces air pollutants. Therefore, in the market for plastic containers,
the marginal social cost curve is above and to the left of the supply curve.
Common property resources like fish stocks in open waters tend to be over-utilized because:
the marginal social cost is greater than the private marginal cost.
The difference between the marginal social cost and the private cost of a common property resource represents:
the opportunity cost of reducing the resource by one unit for other members of society.
In an Edgeworth box, all points of efficiency occur at the
the points of tangency between the sets of indifference curves
Suppose there are 10 apples and 10 oranges in the economy. Joe is currently consuming 4 apples and 5 oranges, and Jane is consuming 6 apples and 5 oranges. At this allocation, Joeʹs marginal utility of apples is 3, and his marginal utility of oranges is 5. Janeʹs marginal utility of apples is 9. The current allocation is necessarily efficient if:
the price of apples is 60% of the orange price.
When new technologies make cleaner production possible,
the price of transferable permits falls
Because trucking as an industry involves the generation of pollutants in engine exhaust,
the supply curve of trucking services understates the true cost of providing those services.
If households could be charged differently for different types of garbage,
there would be a change in the types of items that are disposed of as garbage.
The slope of the production possibilities frontier is defined to be the marginal rate of
transformation
A point lying to the northeast of the production possibilities frontier is
unattainable
Which of the following is true? Partial equilibrium analysis will
understate the impact of a tax for substitutes and overstate the impact for complements.