Give an example where a government subsidy can correct an externality. Explain how the subsidy would lead to a more efficient outcome
What will be an ideal response?
Student responses will vary. The example should be of a positive externality. The subsidy lowers marginal cost leading to an increased supply and a lower price.
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In which of the following ways do advertising and other selling costs affect a firm's cost curves?
i. Advertising expenditures increase total fixed costs. ii. Selling costs increase total fixed costs. iii. Advertising and other selling costs per unit of output decrease as output increases. A) i only B) i and ii C) iii only D) i and iii E) i, ii, and iii
Which of the following groups oversees and administers the Federal Reserve System?
a. The House of Representatives. b. The President's Council of Economic Advisors. c. The U.S. Treasury Department. d. None of these, the Fed is an independent agency.