What policy can implement to correct for this externality

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Reference no: EM13182494

1. When a worker retires, the labour force ________________ and the unemployment rate ____________?

Increases; increases

Increases; decreases

Decreases; increases

Decreases; remains constant

Decreases; decreases

2. Which of the following is a cost of unemployment?

health problems

retraining costs

union power

urban congestion

all of the above

3. Consider the market for bicycles. The Total Cost function is given by TC = 100 + 10q + q2 and there are 20 firms. The demand function is given by P = 120 - q. However, there are significant externalities to the production of bicycles. The government hires economists to investigate and they find that there is a positive consumption externality of E=22q which implies a marginal externality of 22 per bike.

Which of the following policies could possibly be implemented to correct for this externality?

a subsidy for producers

Tradeable permits

A price ceiling

A price floor

More than one of the above

4. Consider the market for bicycles. The Total Cost function is given by TC = 100 + 10q + q2 and there are 20 firms. The demand function is given by P = 120 - q. However, there are significant externalities to the production of bicycles. The government hires economists to investigate and they find that there is a positive consumption externality of E=22q which implies a marginal externality of 22 per bike.

If the government decides to implement a subsidy for buyers, what is the optimal level for the subsidy?

$0

$11

$20

$22

None of the above

5. Consider the market for bicycles. The Total Cost function is given by TC = 100 + 10q + q2 and there are 20 firms. The demand function is given by P = 120 - q. However, there are significant externalities to the production of bicycles. The government hires economists to investigate and they find that there is a positive consumption externality of E=22q which implies a marginal externality of 22 per bike.

If the government implements the optimal subsidy for buyers, what is the deadweight loss?

0

80

225

450

None of the above

6. Which of the following could possibly increase inflation?

A rise in wages

Tax cuts

An oil shortage

Budget deficits

All of the above

7. Which of the following is a goal of Reserve Bank of Australia?

Full employment

Price stability

Economic prosperity

A strong Australian Dollar.

a, b, and c

8. A competitive fertilizer firm produces a large amount of toxic by-product as part of its production process, producing a marginal, negative production externality ME = 15+q. Demand for fertilizer is given by P = 90-2q. The marginal cost and average cost of production is constant and equal to 30. What is the deadweight loss from producing at the competitive equilibrium?

0

337.5

450

627.5

None of the above

9. Jazzy Jeff and the Fresh Prince live together in a small apartment. They want to hire a cleaner. Each has a demand curve describing their willingness to pay for each hour of cleaning. If the price of a cleaner is $15 an hour, what is the socially optimal amount of cleaning for the duo (in hours)?

DJeff = 40-P
DPrince = 80-2P

None of the above

10. Consider a firm that has a marginal product of capital K given my MP = 30 - K. The firm is in both a competitive output and input market. The current rental price for capital is $500 per unit and the interest rate is 10%. The firm sells into a competitive market at an output price of $8. How much capital does the firm hire, K=?.

22

23.75

24.2

29.2

None of the above

Reference no: EM13182494

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