Comment on the following statement: "When there are no externalities present, the level of output for a private good produced by a perfectly competitive firm is efficient."
What will be an ideal response?
The statement is true. Perfectly competitive firms produce where price is equal to marginal cost. If no externalities are present, the price of the product measures the full benefits to society of an additional unit of output, and the marginal cost measures the full costs to society of an additional unit of output. Thus, output is produced up to the point where the additional value from producing another unit the good is equal to the additional cost of producing another unit of the good.
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Large and long-continued increases in the demand for electricity will tend to result in
A) a higher cost of generating electricity. B) a higher price for electricity but no increase in the cost of generating it. C) a reduction in the quantity of electricity demanded as a consequence of higher prices. D) an increase in the quantity of electricity demanded and hence a decrease in its price.
Studies of the major developed countries show that when businesses go looking for funds to finance their activities they usually obtain these funds from
A) government agencies. B) equities markets. C) financial intermediaries. D) bond markets.