A student wrote: A subsidy raises marginal social benefit above marginal social cost and eliminates the deadweight loss from underproduction. If you were the instructor, how would you correct this statement?
What will be an ideal response?
Ques. 2The Roomba 570 is a robotic vacuum cleaner made and sold by iRobot. It can vacuum 4 rooms on a single battery charge and it costs 2 worth of electricity to charge the Roomba.
Lynn is a house cleaner and can vacuum 4 rooms in 1 hour with a traditional vacuum. Suppose you want the 4 rooms in your house vacuumed once a week for one year. Ignoring the cost of any electricity Lynn uses, which method is economically efficient if Lynn charges 20 per hour? 30 per hour? A) Roomba if Lynn charges 20 per hour and Lynn if she charges 30 per hour
B) Lynn if she charges 20 or 30 per hour
C) Roomba if Lynn charges 20 or 30 per hour
D) Lynn if she charges 20 per hour and Roomba if Lynn charges 30 per hour
Ques. 3As illustrated in the above figure, after 60 gallons are produced each hour at Ike's Ice Cream Kitchen, the ATC curve starts to slope upward. The ATC starts to slope upward because the
A) MC curve slopes upward.
B) MC exceeds the ATC.
C) distance between the ATC and the AVC curve is shrinking.
D) None of the above answers is correct.
Ques. 4Which demand is more price elastic: The demand for all personal computers or the demand for Dell computers? Explain your answer.
What will be an ideal response?
Ques. 5When the market for gasoline in Motorland is in equilibrium, the deadweight loss is
A) 37,500 per month.
B) 150,000 per month.
C) 75,000 per month.
D) zero.
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