econ multiple choice

In making which of the following statements is an economist acting more like a scientist? a. A reduction in unemployment benefits will reduce the unemployment rate. b. The rate of inflation should be reduced because it robs the elderly of their savings. c. The unemployment rate should be reduced because unemployment robs individuals of their dignity. d. The state should increase subsidies to universities because the future of our country depends on education.

A reduction in unemployment benefits will reduce the unemployment rate.

Which of the following is not a barrier to entry in a monopolized market? a. A single firm is very large. b. The government gives a single firm the exclusive right to produce some good. c. The costs of production make a single producer more efficient than a large number of producers. d. A key resource is owned by a single firm.

A single firm is very large

Which of the following statements is true a. All costs are fixed in the short run. b. All costs are variable in the long run. c. All costs are variable in the short run. d. All costs are fixed in the long run.

All costs are variable in the long run

Which of the following is most likely to produce scientific evidence about a theory? a. A lawyer employed by Renault addressing the impact of air bags on passenger safety. b. An economist permanently employed at a leading university analysing the impact of bank regulations on lending to small businesses. c. An economist employed by the Trades Union Congress doing research on the impact of trade policy on workers' wages. d. A radio talk show host collecting data from listeners on how capital markets respond to taxation.

An economist permanently employed at a leading university analysing the impact of bank regulations on lending to small businesses.

Which of the following is not a characteristic of a competitive market a. All of these answers are characteristics of a competitive market. b. There are many buyers and sellers in the market. c. The goods offered for sale are largely the same. d. Firms generate small but positive economic profits in the long run. e. Firms can freely enter or exit the market.

Firms generate small but positive economic profits in the long run

Which of the following statements about price and marginal cost in competitive and monopolized markets is true? a. In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost. b. In competitive markets, price equals marginal cost; in monopolized markets, price equals marginal cost. c. In competitive markets, price exceeds marginal cost; in monopolized markets, price exceeds marginal cost. d. In competitive markets, price exceeds marginal cost; in monopolized markets, price equals marginal cost.

In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost.

Roberto and Thomas live in a university hall of residence. Roberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true? a. It is efficient for Roberto to stop playing loud music regardless of who has the property right to the level of sound. b. It is efficient for Roberto to continue to play loud music. c. It is efficient for Roberto to stop playing loud music only if Thomas has the property right to peace and quiet. d. It is efficient for Roberto to stop playing loud music only if Roberto has the property right to play loud music.

It is efficient for Roberto to stop playing loud music regardless of who has the property right to the level of sound.

Suppose each of 20 neighbours on a street values street repairs at €3,000. The cost of the street repair is €40,000. Which of the following statements is true? a. It is efficient for the government to tax the residents €2,000 each and repair the road. b. It is efficient for each neighbour to pay €3,000 to repair the section of street in front of his/her home. c. None of these answers are true. d. It is not efficient to have the street repaired.

It is efficient for the government to tax the residents €2,000 each and repair the road.

Which of the follow statements about price discrimination is not true? a. Perfect price discrimination generates a deadweight loss. b. Price discrimination can raise economic welfare. c. Price discrimination requires that the seller be able to separate buyers according to their willingness to pay. d. Price discrimination increases a monopolist's profits. e. For a monopolist to engage in price discrimination, buyers must be unable to engage in arbitrage.

Perfect price discrimination generates a deadweight loss.

Which of the following is true regarding tradable pollution permits and Pigovian taxes? a. All of these answers are true. b. Pigovian taxes and tradable pollution permits create an efficient market for pollution. c. Tradable pollution permits efficiently reduce pollution only if they are initially distributed to the firms that can reduce pollution at the lowest cost. d. To set the quantity of pollution with tradable pollution permits, the regulator must know everything about the demand for pollution rights. e. Pigovian taxes are more likely to reduce pollution to a targeted amount than tradable pollution permits.

Pigovian taxes and tradable pollution permits create an efficient market for pollution.

Which of the following statements regarding the circular-flow diagram is true? a. If Susan works for BAe Systems and receives a salary payment, the transaction takes place in the market for goods and services. b. If BAe Systems sells a military aircraft, the transaction takes place in the market for factors of production. c. None of these answers. d. The factors of production are owned by households. e. The factors of production are owned by firms.

The factors of production are owned by households.

Which of the following statements about microeconomics and macroeconomics is not true? a. The study of very large industries is a topic within macroeconomics. b. Macroeconomics is concerned with economy-wide phenomena. c. Microeconomics is a building block for macroeconomics. d. Microeconomics and macroeconomics cannot be entirely separated.

The study of very large industries is a topic within macroeconomics.

Which of the following statements is normative? a. Large government deficits cause an economy to grow more slowly. b. People work harder if the wage is higher. c. The unemployment rate should be lower. d. Printing too much money causes inflation.

The unemployment rate should be lower.

Roberto and Thomas live in a university hall of residence. Roberto values playing loud music at a value of €100. Thomas values peace and quiet at a value of €150. Which of the following statements is true about an efficient solution to this externality problem if Roberto has the right to play loud music and if there are no transaction costs? a. Thomas will pay Roberto between €100 and €150 and Roberto will continue to play loud music. b. Roberto will pay Thomas €150 and Roberto will continue to play loud music. c. Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music. d. Roberto will pay Thomas €100 and Roberto will stop playing loud music.

Thomas will pay Roberto between €100 and €150 and Roberto will stop playing loud music.

Thomson is a monopolist in the production of your textbook because a. Thomson has a legally protected exclusive right to produce this textbook. b. Thomson owns a key resource in the production of textbooks. c. Thomson is a natural monopoly. d. Thomson is a very large company.

Thomson has a legally protected exclusive right to produce this textbook.

In which of the following cases is the assumption most reasonable? a. To address the impact of taxes on income distribution, an economist assumes that everyone earns the same income. b. To address the impact of money growth on inflation, an economist assumes that money is strictly coins. c. To model the benefits of trade, an economist assumes that there are two people and two goods. d. To estimate the speed at which a beach ball falls, a physicist assumes that it falls in a vacuum.

To model the benefits of trade, an economist assumes that there are two people and two goods.

A negative externality affects market efficiency in a manner similar to a. an excludable good. b. a private good. c. a common resource. d. a public good.

a common resource

A person who regularly watches BBC television programmes in the UK but fails to pay their TV licence fee is known as a. excess baggage. b. a free rider. c. a costly rider. d. a common resource. e. an unwelcome rider.

a free rider

Which of the following is an example of a common resource a. a fireworks display b. national defence c. iron ore d. a national park

a national park

When an individual buys a car in a congested urban area, it generates a. a positive externality. b. a technology spillover. c. an efficient market outcome. d. a negative externality.

a negative externality.

A congested toll road is a. a good produced by a natural monopoly. b. a private good. c. a public good. d. a common resource.

a private good

Which of the following will not shift a country's production possibilities frontier outward? a. an advance in technology b. an increase in the labour force c. an increase in the capital stock d. a reduction in unemployment

a reduction in unemployment

Economic growth is depicted by a. a shift in the production possibilities frontier outward. b. a movement from inside the curve toward the curve. c. a shift in the production possibilities frontier inward. d. a movement along a production possibilities frontier toward capital goods.

a shift in the production possibilities frontier outward.

a negative externality generates a. a social cost curve that is above the supply curve (private cost curve) for a good. b. none of these answers. c. a social cost curve that is below the supply curve (private cost curve) for a good. d. a social value curve that is above the demand curve (private value curve) for a good.

a social cost curve that is above the supply curve (private cost curve) for a good

a positive externality generates a. a social cost curve that is above the supply curve (private cost curve) for a good. b. none of these answers. c. a social value curve that is above the demand curve (private value curve) for a good. d. a social value curve that is below the demand curve (private value curve) for a good.

a social value curve that is above the demand curve (private value curve) for a good

Which of the following are potential solutions to the problem of air pollution? a. Grant rights of the clean air to citizens so that firms must purchase the right to pollute. b. Auction off pollution permits. c. Regulate the amount of pollutants that firms can put in the air. d. all of these answers

a. Grant rights of the clean air to citizens so that firms must purchase the right to pollute. b. Auction off pollution permits. c. Regulate the amount of pollutants that firms can put in the air.

If there are implicit costs of production, a. accounting profit will exceed economic profit. b. economic profit will always be zero. c. economic profit will exceed accounting profit. d. accounting profit will always be zero. e. economic profit and accounting profit will be equal.

accounting profit will exceed economic profit

In long-run equilibrium in a competitive market, firms are operating at a. the minimum of their average-total-cost curves. b. all of these answers are correct. c. their efficient scale. d. zero economic profit. e. the intersection of marginal cost and marginal revenue.

all of these answers are correct

Foreign trade a. none of these answers. b. increases the scarcity of resources. c. makes a country more equitable. d. allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home. e. allows a country to avoid trade-offs.

allows a country to have a greater variety of products at a lower cost than if it tried to produce everything at home

The gas-guzzler tax that is placed on new vehicles that are very fuel inefficient is an example of a. a tradable pollution permit. b. an attempt to internalize a positive externality. c. an application of the Coase theorem. d. an attempt to internalize a negative externality.

an attempt to internalize a negative externality.

When wealthy alumni provide charitable contributions to their universities to reduce the tuition payments of current students, it is an example of a. an attempt to internalize a positive externality. b. an attempt to internalize a negative externality. c. a Pigovian tax. d. a command-and-control policy.

an attempt to internalize a positive externality.

If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause a. an increase in the number of firms in the market but no increase in the price of the good. b. an increase the price of the good and an increase in the number of firms in the market. c. an increase the price of the good but no increase in the number of firms in the market. d. no impact on either the price of the good or the number of firms in the market.

an increase in the number of firms in the market but no increase in the price of the good

In the long-run, some firms will exit the market if the price of the good offered for sale is less than a. marginal revenue. b. marginal cost. c. average total cost. d. average revenue.

average total cost

The efficient scale of production is the quantity of output that minimizes a. average fixed cost. b. average total cost. c. average variable cost. d. marginal cost.

average total cost

When marginal costs are below average total costs, a. average fixed costs are rising. b. average total costs are falling. c. average total costs are rising. d. average total costs are minimized.

average total costs are falling.

If marginal costs equal average total costs, a. average total costs are falling. b. average total costs are rising. c. average total costs are maximized. d. average total costs are minimized.

average total costs are minimized.

If, as the quantity produced increases, a production function first exhibits increasing marginal product and later diminishing marginal product, the corresponding marginal-cost curve will a. be flat (horizontal). b. slope upward. c. slope downward. d. be U-shaped.

be U-shaped

If a production function exhibits diminishing marginal product, its slope a. is linear (a straight line). b. becomes steeper as the quantity of the input increases. c. could be any of these answers. d. becomes flatter as the quantity of the input increases.

becomes flatter as the quantity of the input increases

If a production function exhibits diminishing marginal product, the slope of the corresponding total-cost curve a. is linear (a straight line). b. could be any of these answers. c. becomes steeper as the quantity of output increases. d. becomes flatter as the quantity of output increases.

becomes steeper as the quantity of output increases

When a monopolist produces an additional unit, the marginal revenue generated by that unit must be a. below the price because the price effect outweighs the output effect. b. above the price because the output effect outweighs the price effect. c. above the price because the price effect outweighs the output effect. d. below the price because the output effect outweighs the price effect.

below the price because the price effect outweighs the output effect

A private good is a. rival but not excludable. b. not rival but excludable. c. both rival and excludable. d. neither rival nor excludable.

both rival and excludable

Economic models are a. usually made of wood and plastic. b. built with assumptions. c. useless if they are simple. d. created to duplicate reality.

built with assumptions

Using government regulations to force a natural monopoly to charge a price equal to its marginal cost will a. cause the monopolist to exit the market. b. improve efficiency. c. raise the price of good. d. attract additional firms to enter the market.

cause the monopolist to exit the market

The Tragedy of the Commons is a parable that illustrates why a. common resources are overconsumed. b. public goods are underproduced. c. private goods are underconsumed. d. natural monopolies overproduce goods.

common resources are overconsumed.

Which of the following is not considered a transaction cost incurred by parties in the process of contracting to eliminate a pollution externality? a. costs incurred due to lawyers fees b. costs incurred to reduce the pollution c. costs incurred to enforce the agreement d. costs incurred due to a large number of parties affected by the externality e. All of these answers are considered transaction costs.

costs incurred to reduce the pollution

The monopolist's supply curve a. does not exist. b. is the marginal cost curve above average variable cost. c. is the marginal cost curve above average total cost. d. is the upward-sloping portion of the average total cost curve. e. is the upward-sloping portion of the average variable cost.

does not exist

If a competitive firm doubles its output, its total revenue a. doubles. b. more than doubles. c. less than doubles. d. cannot be determined because the price of the good may rise or fall.

doubles

In the long run, if a very small factory were to expand its scale of operations, it is likely that it would initially experience a. an increase in average total costs. b. diseconomies of scale. c. economies of scale. d. constant returns to scale.

economies of scale

Points on the production possibilities frontier are a. inefficient. b. normative. c. unattainable. d. efficient. e. none of these answers.

efficient.

For a competitive firm, marginal revenue is a. total revenue divided by the quantity sold. b. equal to the quantity of the good sold. c. average revenue divided by the quantity sold. d. equal to the price of the good sold.

equal to the price of the good sold

a negative externality (that has not been internalized) causes the a. optimal quantity to exceed the equilibrium quantity. b. equilibrium quantity to be either above or below the optimal quantity. c. equilibrium quantity to equal the optimal quantity. d. equilibrium quantity to exceed the optimal quantity.

equilibrium quantity to exceed the optimal quantity

If a person can be prevented from using a good, the good is said to be a. excludable. b. a common resource. c. a public good. d. rival.

excludable

Accounting profit is equal to total revenue minus a. implicit costs. b. variable costs. c. the sum of implicit and explicit costs. d. explicit costs. e. marginal costs.

explicit costs.

Compared to a perfectly competitive market, a monopoly market will usually generate a. higher prices and lower output. b. higher prices and higher output. c. lower prices and lower output. d. lower prices and higher output.

higher prices and lower output

Economic profit is equal to total revenue minus a. variable costs. b. implicit costs. c. explicit costs. d. marginal costs.

implicit costs.

Raising taxes and increasing welfare payments a. reduces market power b. proves that there is such a thing as a free lunch. c. improves efficiency at the expense of equity. d. none of these answers e. improves equity at the expense of efficiency

improves equity at the expense of efficiency

The purpose of antitrust (also known as competition) laws is to a. increase competition in an industry by preventing mergers and breaking up large firms. b. regulate the prices charged by a monopoly. c. increase merger activity to help generate synergies that reduce costs and raise efficiency. d. create public ownership of natural monopolies. e. do all of these answers.

increase competition in an industry by preventing mergers and breaking up large firms

If marginal revenue exceeds marginal cost, a monopolists should a. increase output. b. decrease output. c. keep output the same because profits are maximized when marginal revenue exceeds marginal cost. d. raise the price.

increase output.

If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost, the firm could increase profits if it a. decreased production. b. maintained production at the current level. c. temporarily shut down. d. increased production.

increased production

The long-run market supply curve a. is always more elastic than the short-run market supply curve. b. is always perfectly elastic. c. has the same elasticity as the short-run market supply curve. d. is always less elastic than the short-run market supply curve.

is always more elastic than the short-run market supply curve

The competitive firm maximizes profit when it produces output up to the point where a. price equals average variable cost. b. marginal revenue equals average revenue. c. marginal cost equals total revenue. d. marginal cost equals marginal revenue.

marginal cost equals marginal revenue

A monopolist maximizes profit by producing the quantity at which a. marginal revenue equals marginal cost. b. marginal revenue equals price. c. marginal cost equals price. d. marginal cost equals demand. e. none of these answers.

marginal revenue equals marginal cost

Which of the following markets would most closely satisfy the requirements for a competitive market? a. electricity b. cable television c. cola d. milk e. All of these answers represent competitive markets.

milk

Which of the following is not a factor of production? a. labour b. land c. money d. capital e. All of these answers are factors of production.

money

Which of the following is an example of a public good? a. hot dogs at a picnic b. whales in the ocean c. national defence d. apples on a tree in a public park

national defense

A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a a. natural monopoly. b. perfect competitor. c. government monopoly. d. regulated monopoly.

natural monopoly

a public good is a. neither rival nor excludable. b. rival but not excludable. c. both rival and excludable. d. not rival but excludable.

neither rival nor excludable

A good produced by a natural monopoly is a. rival but not excludable. b. neither rival nor excludable. c. not rival but excludable. d. both rival and excludable

not rival but excludable.

a positive externality (that has not been internalized) causes the a. equilibrium quantity to exceed the optimal quantity. b. equilibrium quantity to equal the optimal quantity. c. optimal quantity to exceed the equilibrium quantity. d. equilibrium quantity to be either above or below the optimal quantity.

optimal quantity to exceed the equilibrium quantity

If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be a. downward sloping. b. perfectly inelastic. c. upward sloping. d. perfectly elastic.

perfectly elastic

In the long run, the competitive firm's supply curve is the a. entire marginal cost curve. b. upward-sloping portion of the average total cost curve. c. portion of the marginal cost curve that lies above the average total cost curve. d. upward-sloping portion of the average variable cost curve. e. portion of the marginal cost curve that lies above the average variable cost curve.

portion of the marginal cost curve that lies above the average total cost curve

In the short run, the competitive firm's supply curve is the a. upward-sloping portion of the average total cost curve. b. upward-sloping portion of the average variable cost curve. c. portion of the marginal cost curve that lies above the average total cost curve. d. entire marginal cost curve. e. portion of the marginal-cost curve that lies above the average variable cost curve.

portion of the marginal-cost curve that lies above the average variable cost curve

A positive externality affects market efficiency in a manner similar to a a. rival good. b. public good. c. private good. d. common resource.

public good.

A free rider is a person who a. receives the benefit of a good but avoids paying for it. b. pays for a good but fails to receive any benefit from the good. c. fails to produce goods but is allowed to consume goods. d. produces a good but fails to receive payment for the good.

receives the benefit of a good but avoids paying for it.

When governments employ cost-benefit analysis to help them decide whether to provide a public good, measuring benefits is difficult because a. there are no benefits to the public since a public good is not excludable. b. the benefits are infinite because a public good is not rival and an infinite amount of people can consume it at the same time. c. one can never place a value on human life or the environment. d. respondents to questionnaires have little incentive to tell the truth.

respondents to questionnaires have little incentive to tell the truth.

A common resource is a. not rival but excludable. b. both rival and excludable. c. rival but not excludable. d. neither rival nor excludable.

rival but not excludable.

If one person's consumption of a good diminishes other people's use of the good, the good is said to be a. rival. b. a good produced by a natural monopoly. c. a common resource. d. excludable.

rival.

Tradable pollution permits a. reduce the incentive for technological innovations to further reduce pollution. b. set the price of pollution. c. determine the demand for pollution rights. d. set the quantity of pollution.

set the quantity of pollution.

A Pigovian tax on pollution a. sets the quantity of pollution. b. reduces the incentive for technological innovations to further reduce pollution. c. sets the price of pollution. d. determines the demand for pollution rights.

sets the price of pollution.

Positive statements are a. macroeconomic. b. microeconomic. c. statements of description that can be tested. d. statements of prescription that involve value judgments.

statements of description that can be tested.

To internalize a positive externality, an appropriate public policy response would be to a. ban the good creating the externality. b. tax the good. c. subsidize the good. d. have the government produce the good until the value of an additional unit is zero.

subsidize the good.

To internalize a negative externality, an appropriate public policy response would be to a. have the government take over the production of the good causing the externality. b. ban the production of all goods creating negative externalities. c. tax the good. d. subsidize the good.

tax the good

Public ownership of natural monopolies a. tends to be inefficient. b. usually lowers the cost of production dramatically. c. creates synergies between the newly acquired firm and other government-owned companies. d. does none of the things described in these answers.

tends to be inefficient

When markets fail to allocate resources efficiently, the ultimate source of the problem is usually a. government regulation. b. that prices are not low enough so firms overproduce. c. that prices are not high enough so people overconsume. d. that property rights have not been well established.

that property rights have not been well established.

Public goods are difficult for a private market to provide due to a. the rivalness problem. b. the public goods problem. c. the Tragedy of the Commons. d. the free-rider problem.

the free-rider problem

Which of the following issues is related to microeconomics? a. the impact of oil prices on car production b. the impact of money on inflation c. the impact of technology on economic growth d. the impact of the deficit on saving

the impact of oil prices on car production

The most efficient pollution control system would ensure that a. the regulators decide how much each polluter should reduce its pollution. b. no pollution of the environment is tolerated. c. each polluter reduce its pollution an equal amount. d. the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount.

the polluters with the lowest cost of reducing pollution reduce their pollution the greatest amount.

The scientific method requires that a. the scientist be objective. b. the scientist use precision equipment. c. only correct theories are tested. d. only incorrect theories are tested. e. the scientist use test tubes and have a clean lab.

the scientist be objective.

an externality is a. the benefit that accrues to the buyer in a market. b.the cost that accrues to the seller in a market. c.none of these answers. d. the compensation paid to a firm's external consultants. e. the uncompensated impact of one person's actions on the well-being of a bystander.

the uncompensated impact of one person's actions on the well-being of a bystander

According to the Coase theorem, private parties can solve the problem of externalities if a. there are no transaction costs. b. each affected party has equal power in the negotiations. c. the party affected by the externality has the initial property right to be left alone. d. there are a large number of affected parties. e. the government requires them to negotiate with each other.

there are no transaction costs.

A monopoly is able to continue to generate economic profits in the long run because a. there is some barrier to entry to that market. b. potential competitors sometimes don't notice the profits. c. the monopolist is financially powerful. d. antitrust laws eliminate competitors for a specified number of years. e. of all of the things described in these answers

there is some barrier to entry to that market.

the government engages in a technology policy a. by allocating tradable technology permits to high technology industry. b. to internalize the positive externality associated with technology-enhancing industries. c. to help stimulate private solutions to the technology externality. d. to internalize the negative externality associated with industrial pollution.

to internalize the positive externality associated with technology-enhancing industries.

Suppose an industry emits a negative externality such as pollution and the possible methods to internalize the externality are command-and-control policies, Pigovian taxes, and tradable pollution permits. If economists were to rank these methods for internalizing a negative externality based on efficiency, ease of implementation, and the incentive for the industry to further reduce pollution in the future, they would probably rank them in the following order (from most favoured to least favoured): a. Pigovian taxes, command-and-control policies, tradable pollution permits. b. tradable pollution permits, Pigovian taxes, command-and-control policies. c. tradable pollution permits, command-and-control policies, Pigovian taxes. d. command-and-control policies, tradable pollution permits, Pigovian taxes. e. They would all rank equally high because the same result can be obtained from any one of the policies.

tradable pollution permits, Pigovian taxes, command-and-control policies.

The inefficiency associated with monopoly is due to a. underproduction of the good. b. the monopoly's profits. c. the monopoly's losses. d. overproduction of the good.

underproduction of the good

If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be a. perfectly inelastic. b. perfectly elastic. c. upward sloping. d. downward sloping.

upward sloping

A grocery store should close at night if the a. variable costs of staying open are less than the total revenue due to staying open. b. total costs of staying open are less than the total revenue due to staying open. c. variable costs of staying open are greater than the total revenue due to staying open. d. total costs of staying open are greater than the total revenue due to staying open.

variable costs of staying open are greater than the total revenue due to staying open

Which of the following is a variable cost in the short run? a. rent on the factory b. wages paid to factory labour c. interest payments on borrowed financial capital d. payment on the lease for factory equipment e. salaries paid to upper management

wages paid to factory labour

If regulators break up a natural monopoly into many smaller firms, the cost of production a. will rise. b. will fall. c. will remain the same. d. could either rise or fall depending on the elasticity of the monopolist's supply curve.

will rise

Suppose that requiring motorcycle riders to wear helmets reduces the probability of a motorcycle fatality from 0.3 percent to 0.2 percent over the lifetime of a motorcycle rider and that the cost of a lifetime supply of helmets is €500. It is efficient for the government to require riders to wear helmets if human life is valued at a. €150 or more. b. €500,000 or more. c. €50,000 or more. d. €500 or more. e. €100 or more.

€500,000 or more

Nicole owns a small pottery factory. She can make 1,000 pieces of pottery per year and sell them for €100 each. It costs Nicole €20,000 for the raw materials to produce the 1,000 pieces of pottery. She has invested €100,000 in her factory and equipment: €50,000 from her savings and €50,000 borrowed at 10 per cent. (Assume that she could have loaned her money out at 10 per cent, too.) Nicole can work at a competing pottery factory for €40,000 per year. The accounting profit at Nicole's pottery factory is a. €30,000. b. €35,000. c. €75,000. d. €70,000. e. €80,000.

€75,000.