What happens if we internalize a negative externality?
a) Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and increase the price of the good produced.
b) Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced.
c) Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and decrease the price of the good produced.
d) Internalizing a negative externality will cause an industry to increase the quantity it supplies to the market and decrease the price of the good produced.
Answer: b) Internalizing a negative externality will cause an industry to decrease the quantity it supplies to the market and increase the price of the good produced.
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A bakery producing bread reports the following production information:
# Workers Total Product (loaves of bread per hour) 0 0 1 35 2 65 3 85 4 100 5 110 The bread sells in a competitive market at a price of $0.30 each. The firm hires workers in a competitive labor market at a wage of $7 per hour. How many workers should the firm hire? Explain your answer.
Which of the following statements about economic methodology is correct?
a. An economic law is a cause-and-effect relationship that has been verified by a controlled experiment. b. The test of a theory's validity is its usefulness in explaining reality. c. An economic law is a statement about group behavior that is based on the observed behavior of a single individual. d. An economic law, because it is based on probabilities, can only be expected to be true about half the time. e. Assumptions are ignored in the development of hypotheses.