Author Question: Since collective consumption goods have a marginal cost of zero, the efficient price is equal to ... (Read 61 times)

waynest · **on:** Jul 1, 2018

Since collective consumption goods have a marginal cost of zero, the efficient price is equal to _____.

a. average fixed cost
b. average variable cost
c. marginal cost
d. the market price

Question 2

Discuss why saving and investing entails risk. What is the reward for bearing risk? Explain how income taxes affect the returns to risk bearing and its impact on overall risk taking and innovation.

What will be an ideal response?

ntsoane kedibone · **Reply #1 on:** Jul 1, 2018

Answer to Question 1

c

Answer to Question 2

Saving and investing entails risk because individuals are bearing the burden of the possibility that investments might not pay out or that inflation might erode the value of savings. The reward for bearing risk is above-normal profits. The higher the risk, the higher the potential for above-normal profits. Income taxes reduce the return on bearing risk. On the other side, however, government does not subsidize losses from risk taking. Thus, income taxes create a bias against risk taking and innovation.