If the Government Wants to Increase Economic Efficiency, It Should

question 163

Multiple Choice

If the government wants to increase economic efficiency, it should:

• A)never tax goods.
• B)never subsidize goods.
• C)tax goods that entail positive externalities.
• D)subsidize goods that entail positive externalities.

Understand the effect of interventions and the importance of measuring their reversibility.

Understand the concept of marginal utility and its impact on total utility.

Grasp the concept of consumer surplus and how it is determined in different scenarios.

Recognize the relationship between price changes and consumer behavior in terms of quantity demanded and consumer surplus.

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Definitions:

Decline In Demand

A situation where consumers' desire and ability to purchase a product or service decreases, often reflected in lower sales volumes.

Industry Exit

The process of a business ceasing operations in a particular industry, often due to economic factors, competitive pressures, or changes in market demand.

Economic Profits

Earnings that exceed the total costs of production, including both explicit and implicit costs, representing a return above the firm's opportunity costs.

Industry Growth

Industry growth refers to the expansion and increased output of a specific sector of the economy, driven by factors like demand, innovation, and investment.