When Consumers Have Asymmetric Information and When Search Costs and the Number

question 1

Multiple Choice

When consumers have asymmetric information and when search costs and the number of firms are large,a single-price equilibrium in a competitive market

• A) is impossible.
• B) occurs when price equals average cost.
• C) occurs when price equals marginal cost plus the search cost.
• D) occurs when the price is the price a monopoly would set.

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Definitions:

Negative Externality

A cost that affects a party who did not choose to incur that cost, commonly associated with production or consumption of goods and services.

Government Agency

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Pollution Tax

a tax imposed on the emission of pollutants, intended to provide an economic incentive for businesses and individuals to reduce their environmental impact.

Emissions Reduction

The process or actions that lead to a decrease in the amount of pollutants or greenhouse gases released into the atmosphere.