What would happen in a free market system when production of a good generates negative externalities?
A) There is a shortage of the good.
B) There is a surplus of the good.
C) The equilibrium quantity of the good is less than the efficient amount.
D) The equilibrium quantity of the good is more than the efficient amount.
D
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The social interest theory of regulation assumes that
A) regulations favor voters over producers. B) regulations promote the attainment of competitive output. C) public officials seek to keep their jobs. D) public officials favor consumers over producers.
When demand for a firm's product decreases, the firm can take a number of steps to adjust costs and quantities supplied to the market. Some are listed below. Which actions are short run and which are long run? Explain your reasoning
a. Layoff 25 percent of the firm's existing employees. b. Declare bankruptcy and sell all of the firm's plant and equipment. c. Require management personnel to take a significant cut in pay. d. Furlough employees for 3 days each month. e. Move to a smaller production facility.