For the past three years, you have earned economic profits of $5,00 . per year by being the only vendor selling bottled tap water at your town's Fourth of July celebration. When you go to city hall to apply for a vending permit for this year's
celebration, the city clerk mentions that fifty new firms have received permits to sell tap water this year. a . What can you do to protect your economic profit in the short run? b. What can you do to protect your economic profit in the long run?
a . You may be able to protect your profit in the short run by differentiating your bottled tap water from
your competitors' tap water.
b. There is nothing you can do to protect your economic profit in the long run, because other firms, with
product differentiation of their own, will enter the market until economic profit falls to zero.
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When the benefits to society of using a product exceed benefits to the user,
a. the product should be strictly regulated b. the product should be taxed c. the product provides a positive externality d. the product is overproduced at the privately determined equilibrium e. in time the product will not be produced
If the benefits to society of students attending college exceed benefits to the students,
a. higher education should be strictly regulated b. higher education should be taxed c. higher education provides a positive externality d. higher education is overproduced at the privately determined equilibrium e. in time, no higher education will be produced