Question

6. All of the following are sources of inefficiency except:

a. public goods.

b. the invisible hand.

c. external costs.

d. price ceilings.

answer. (b. the invisible hand.)

9. Which of the following is the most correct statement about tax burdens?

a. A tax burden falls most heavily on the side of the market that is closer to unit elastic.

b. A tax burden falls most heavily on the side of the market that is elastic.

c. A tax burden is distributed independently of relative elasticities of supply and demand.

d. A tax burden falls most heavily on the market that is inelastic.

answer (c. A tax burden is distributed independently of relative elasticities of supply and demand.)

16. The Coase theorem suggests that:

a. the government should be actively involved in solving the problem of externalities.

b. private parties may be able to solve the problem of externalities on their own.

c. high transaction or bargaining costs are necessary in solving the problem of externalities.

d. demand creates its own supply.

answer. (b. private parties may be able to solve the problem of externalities on their own.)

28. Which of the following represents a long-run decision for the firm?

a. rehiring workers who were previously laid off.

b. determining what price to charge for a given level of output.

c. deciding how much output to supply to the market at the current market price.

d. building another wing on the plant in order to add a new assembly line.

answer. (d. building another wing on the plant in order to add a new assembly line.)

please help me explain these questions. Thanks in advance

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Answer 1

1) Solution: the invisible hand
Explanation: The invisible hand phrase refers to the unobservable forces in the market that contributes to the demand and supply of products in a free market on reaching automatically to the equilibrium

2) Solution: A tax burden falls most heavily on the side of the market that is inelastic.
Explanation: If demand is more elastic and supply is inelastic producers bear bigger burden for the cost of the tax; and vice-a-versa.

3) Solution: private parties may be able to solve the problem of externalities on their own
Explanation: Coase theorem provides the description of efficiency in an economy on an outcome in the problem of externalities

4) Solution: Building another wing on the plant in order to add a new assembly line
Explanation: Firm's long-run decision is building another plant wing for an additional assembly line