Question

200 Final W20A - Saved - Le Search eferences Mailings Review View Help 43. If average total cost is decreasing, then: A) marginal cost must be greater than average total cost. B) the average fixed cost curve must lie above the average variable cost curve, C) marginal cost must be less than average total cost. D) total cost must also be decreasing. 44. Suppose that the production of a good results in negative externalities, but there is no government involvement in the market. As a result, the market equilibrium quantity will be A) too high from society's point of view, so the government should add a subsidy B) too low from society's point of view, so the government should add a tax C) too high from society's point of view, so the government should add a tax. D) too low from society's point of view, so the government should add a subsidy 45. "When the price of a product falls, the purchasing power of our money income rises and thus permits us to purchase more of the product. This statement describes: A) the income effect B) the substitution effect. istion. The diagram illustrates the Marginal cost, MC,

Answer 1

Answer 43

Marginal cost must be less than average total cost

The marginal total cost intersects ( i.e equals) the Average total cost , when average total cost is at its minimum. Beyond that pint Average total cost starts increasing. Thus we can say marginal cost is less than average total cost as average total cost is still decreasing

Answer 44

Too high for society's point of view, so government should add tax

As the production of a good leads to a negatitve externality (i.e loss to the society in a non financial form), the sale of this good is quite high and an tax implementation would reduce consumption reducing the externality.

Answer 45

Income effect

As the price of goods falls the real value of our money increases, strentehing the purchasing power on consumption.

(Please consider giving an upvote if you find it useful)