Externalities
Common Goods and Resources/Costs of Production
Firms in Competitive Markets
Monopoly
100
A negative externality is shown to the _________ of the demand curve.
left
100
A good/service is __________ if a person can be prevented from using it.
excludable
100
How many buyers and sellers are in a perfectly competitive market?
many
100
If there's only one water provider in Fayetteville, can they charge whatever price they choose?
yes; but only to a certain point, because it still has to match up with the demand curve
200
What would the government do in the case of a positive externality?
They would subsidize the production of that good.
200
It's the 4th of July and Katherine doesn't want to buy tickets to see the firework show. However, she can see the firework show from far away. What is Katherine?
Katherine is a free rider
200
Can firms freely enter and exit a perfectly competitive market?
yes, easy to do
200
In a monopoly, MR _________ when you increase output.
decreases
300
DWL exists in the case of which externality?
both
300
Draw the 2x2 table that shows all four types of goods and whether they are excludable and/or rival in consumption.
300
TR = 50
explicit costs = 30
implicit costs = 10
economic profit = ?
accounting profit = ?
economic profit = 50 - 30 - 10 = 10
accounting profit = 50 - 30 = 20
300
Can monopolies still experience dead weight loss (DWL)?
yes
400
A local factory is producing pollution in a small town. Show the externality effect on a graph and the area of tax or subsidy.
400
Explain the relationship between the Production Function and the Total Cost Function. (which one levels out, which one increases exponentially, why?)
PF: levels out because at some point, there will be too many workers/inputs that there is barely any marginal output
TC: increases exponentially because the PF shows you can barely increase output anymore and it becomes too costly to try to do so
400
Graph a firm experiencing profit.
Show: profit maximizing point and profit.
400
Graph a monopoly.
500
Sofia pays Sam $50 to mow her lawn every week. When the government levies a mowing tax of $10 on Sam, he raises his price to $60. Sofia continues to hire him at the higher price. What is the change in PS and CS?
500
Graph all four cost curves: MC, ATC, AVC, and AFC.
500
Graph a firm experiencing a loss.
Show: the profit maximizing point, TR, TC, and loss.
500
Graph a monopoly and show where profit is.
