Suppose that smoking creates a negative externality. If the government does not interfere in the cigarette market, then
a. the equilibrium quantity of cigarettes smoked will equal the socially optimal quantity of cigarettes smoked.
b. the equilibrium quantity of cigarettes smoked will be greater than the socially optimal quantity of cigarettes smoked.
c. the equilibrium quantity of cigarettes smoked will be less than the socially optimal quantity of cigarettes smoked.
d. There is not enough information to answer the question.
b
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What makes a model compelling?
a. its predictions b. its mathematical structure c. its assumptions d. its simplicity
If the United States, at the point where it is currently producing, must give up the production of 500 bicycles (B) to produce 20 additional tractors (T) with the same resources, its opportunity cost may be expressed as:
A) 1/25B = 1T. B) 1B = 1/25T. C) 1B=1T. D) 1B=25T.