The social cost of production equals
A. the external cost minus the private benefit.
B. the external cost minus the external benefit.
C. the private cost plus the external cost.
D. the social cost plus the private cost.
Answer: C. the private cost plus the external cost.
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In the early 1990s, Serbia, a developing country, experienced hyperinflation because its central bank increased the money supply too rapidly. Serbia's central bank most likely adopted this monetary policy because:
A. it didn't care about inflation. B. the Serbian government granted independence to the central bank. C. the Serbian government had no other way to finance its expenditures. D. it believed that its actions would not trigger inflation.
Other things equal, if the fixed costs of a firm were to increase by $100,000 per year, which of the following would happen?
A. Marginal costs and average variable costs would both rise. B. Average fixed costs and average variable costs would rise. C. Average fixed costs would rise, but marginal costs would fall. D. Average fixed costs and average total costs would rise.