Replacing the monopoly with perfectly competitive firms

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A. In a monopoly market where production generates a positive externality social welfare is always increased by replacing the monopoly with perfectly competitive firms.

True

False

B. People who keep their yard neat and attractive provide a positive externality for others in the neighborhood. Assume that Jeffrey obtains utility of 4 from the attractiveness of his yard for each hour per week he spends tending it. On the other hand, his disutility from tending his yard is H2, where H is hours spent per week. Which of the following statements are true?

a. 4 hours of yardwork are privately optimal for Jeffrey

b. 2 hours of yardwork are privately optimal for Jeffrey

c. 4 hours of yardwork are socially optimal

d. 8 hours of yardwork are socially optimal

Reference no: EM132414673

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