Knowing that the presence of externalities reduces surplus, it implies that:
A. there are mutually beneficial trades waiting to be exploited so private parties have an incentive to solve the externality problem themselves.
B. government needs to find them and correct the market.
C. there are mutually beneficial trades waiting to be exploited, so government has an incentive to force those parties to solve the problem themselves.
D. None of these statements is true.
A. there are mutually beneficial trades waiting to be exploited so private parties have an incentive to solve the externality problem themselves.
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A firm would decide to shut down if its production resulted in
A) AFC > AVC. B) MR < AVC. C) ATC > AVC. D) MR < ATC.
In order to maximize profits, a firm that can sell all it wants without affecting price should produce
a. where average variable costs are minimized. b. where marginal cost is equal to average variable costs. c. where marginal cost is equal to price. d. where marginal cost is a minimum.