In a two time-period example, economic efficiency is maximized when
a. The marginal net benefits are maximized in both time periods
b. The discount rate is set equal to the marginal benefits
c. The marginal net benefit in the first time period is set equal to the present value of marginal net benefits in the second time period
d. The marginal net benefits in the first period are set equal to the discount rate in the second time period
e. The marginal net benefits in the first period are set equal to the user costs in the second time period
Ans: c. The marginal net benefit in the first time period is set equal to the present value of marginal net benefits in the second time period
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Refer to the above graph. At output level H, the area of economic profit is:
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