Author Question: Suppose the private marginal cost of pumping water from an aquifer remains constant as the quantity ... (Read 69 times)

deesands · **on:** Jul 1, 2018

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 ________. A) decreases, decreases.
B) decreases, increases
C) increases, decreases
D) increases, increases

Question 2

Microsoft wants to calculate the effect of a worldwide 5 price cut on its sales of Excel to clients in different countries. Microsoft sells Excel at different prices in U.S., Japan and Europe. Before the price cut U.S.

sales were twice sales in Japan and Europe. If the price of elasticity of demand in the U.S., Japan and Europe are -3, -4, and -2 respectively, the worldwide sales rise by A) 10.
B) 15.
C) 20.
D) 25.
E) none of the above