A possible solution to the problems of external benefits is
A) to tax those receiving the extra benefits.
B) production of the good by government.
C) effluent fees.
D) to restrict the amount of the good through direct government regulation.
Answer: B
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Suppose that each worker must use only one shovel to dig a trench, and shovels are useless by themselves. In the long run, the firm will experience
A) increasing returns to scale. B) constant returns to scale. C) decreasing returns to scale. D) The returns to scale cannot be determined from the information provided.
There is a 15 percent increase in the price of lumber used by a firm that builds new homes. This causes
A) a decrease in the quantity of new homes supplied. B) an increase in the supply of new homes. C) an increase of the quantity supplied of new homes. D) a decrease in the supply of new homes.