The more we have of a good or service, the smaller is its marginal benefit and the less we are willing to pay for an additional unit of it.
Indicate whether the statement is true or false
Ques. 2The number of substitutes available affects the price elasticity of demand for a good. So one way to know if apples and oranges are substitutes for each other is to look at the price elasticity of demand for each. Comment on this assertion.
What will be an ideal response?
Ques. 3Because of free riders, a private, unregulated market would not produce the efficient quantity of a public good.
Indicate whether the statement is true or false
Ques. 4The figure above illustrates the problem of overcrowding and external costs experienced during the summer months in the state park.
If the market is unregulated, in equilibrium the external cost of visiting the state park is given by the distance between A) points H and G.
B) points I and F.
C) points F and G.
D) points G and K.
Ques. 5In the long run, perfectly competitive firms earn just enough revenue to
A) pay all fixed costs.
B) pay all accounting costs.
C) pay all opportunity costs.
D) attract entry.
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