The above figure shows Jane's budget line and two of her indifference curves. If the price of a lobster dinner falls so that Jane can now purchase the combination represented by Point B, Jane would experience
A) an increase in the opportunity cost of a lobster dinner.
B) no change in her marginal rate of substitution.
C) an income and a substitution effect.
D) Both answers B and C are correct.
Ques. 2A natural monopoly occurs when
A) one firm owns all the vital resources needed to produce a particular good.
B) economies of scale allow one firm to supply the entire market at the lowest possible cost.
C) a few firms collude to act as a single firm.
D) one firm captures all the consumer surplus.
Ques. 3When long-run average costs increase as output increases, there are
A) economies of scale.
B) diseconomies of scale.
C) constant returns to scale.
D) constant marginal costs.
Ques. 4The outcome from a voucher scheme is efficient when the government makes the value of the voucher equal to ________.
A) marginal external cost
B) marginal external benefit
C) external cost
D) external benefit
Ques. 5Mike owns a car worth 20,000, and that is his only wealth. There is a 10 percent chance that Mike will have an accident within a year. If he does have an accident, his car is worthless. What is Mike's expected wealth?
What will be an ideal response?
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