« previous next »

Author Question: Comment on the following statement: When a negative externality is present, and a firm does not ... (Read 27 times)

ss2343

  • Hero Member
  • *****
  • Posts: 548
on: Jun 29, 2018
Comment on the following statement: When a negative externality is present, and a firm does not factor the additional social cost into its decisions, the firm is likely to produce a level of output that is lower than the efficient level.
 
  What will be an ideal response?

Question 2

Refer to Figure 13-3. Suppose the economy is at point A. If investment spending increases in the economy, where will the eventual long-run equilibrium be?
 
  A) A B) B C) C D) D


spencer.martell

  • Sr. Member
  • ****
  • Posts: 342
Reply #1 on: Jun 29, 2018
Answer to Question 1

The statement is false. When a negative externality is present, the true marginal cost of producing the good is higher than the marginal cost the firm bears. Firms in perfect competition will produce where price is equal to marginal cost (that the firm bears). Thus, the firm is producing a level of output for which the true cost (private + external cost) is greater than the price. This means that the level is output is greater than the efficient level of output.

Answer to Question 2

C


Related Topics

Need homework help now?

Ask unlimited questions for free

Ask a Question
« previous next »
 

Did you know?

Children of people with alcoholism are more inclined to drink alcohol or use hard drugs. In fact, they are 400 times more likely to use hard drugs than those who do not have a family history of alcohol addiction.

Did you know?

Blastomycosis is often misdiagnosed, resulting in tragic outcomes. It is caused by a fungus living in moist soil, in wooded areas of the United States and Canada. If inhaled, the fungus can cause mild breathing problems that may worsen and cause serious illness and even death.

Did you know?

When taking monoamine oxidase inhibitors, people should avoid a variety of foods, which include alcoholic beverages, bean curd, broad (fava) bean pods, cheese, fish, ginseng, protein extracts, meat, sauerkraut, shrimp paste, soups, and yeast.

Did you know?

Astigmatism is the most common vision problem. It may accompany nearsightedness or farsightedness. It is usually caused by an irregularly shaped cornea, but sometimes it is the result of an irregularly shaped lens. Either type can be corrected by eyeglasses, contact lenses, or refractive surgery.

Did you know?

As of mid-2016, 18.2 million people were receiving advanced retroviral therapy (ART) worldwide. This represents between 43–50% of the 34–39.8 million people living with HIV.

Cell-wall structure of Gram-positive and Gram-negative bacteria. Cell-wall structure of Gram-positive and Gram-negative bacteria.
negative feedback negative feedback
An orange-red biohazard symbol indicates that bloodborne pathogens may be present, and items should ... An orange-red biohazard symbol indicates that bloodborne pathogens may be present, and items should ...
Negative reading oxygen sensor voltage can be caused by several problems. Negative reading oxygen sensor voltage can be caused by several problems.
Touch the test light to the negative (–) terminal of the battery or a good engine ground to check ... Touch the test light to the negative (–) terminal of the battery or a good engine ground to check ...
A bank statement shows a balance of $2,970.31 The check register of the account owner shows an ... A bank statement shows a balance of $2,970.31 The check register of the account owner shows an ...
Video: Polymerase chain reaction PCR - Animation

For a complete list of videos, visit our video library