Share
Explore BrainMass

monopolistic competition, price and marginal cost

Please verify my answers:

Because monopolistically competitive firms charge a P > MC
a. monopolistic competition is efficient
b. monopolistic competition is inefficient
c. the marginal benefit to society of an additional unit of output is below its cost
d. B and C are true

My answer is D

When individuals take external costs and benefits into account
a. there are no external costs
b. they internalize the externality
c. the government needs to intervene in the market
d. the market will not reach an efficient solution

the answer is B

According to the Coase theorem, when negative externalities are present, a market will
a. always reach an efficient solution
b. reach an efficient solution if transaction costs are low
c. reach an efficient solution only if the government intervenes in the market
d. reach an efficient solution only if the negative externalities are offset by positive externalities

my answer is D

Taxes are a more effective method of controlling pollution than environmental standards because
a. standards allow greater flexibility
b. standards require less information
c. standards never require the efficient level of output
d. taxes encourage reducing pollution at minimum cost

my answer is A

The licenses that enable the holder to pollute up to a specified amount during a given time period that can be bought and sold by polluters are called
a. emissions taxes
b. Pigouvian taxes
c. tradable emission permits
d. environmental standards

A is my answer.

Solution Preview

The definition of inefficiency is that the marginal benefit to society of an additional unit of output is above its cost. Therefore b and c cannot both be right.

For the second one, your answer is right.

For the third one, the answer is b. According to the Coase theorem, when negative externalities ...

$2.19