In the Case of Externalities,government Can Use Taxes and Subsidies

question 37

True/False

In the case of externalities,government can use taxes and subsidies to turn an inefficient outcome into an efficient outcome.

Explain consumer surplus and producer surplus in a market transaction.

Recognize the role of competitive markets and the principle of the invisible hand in promoting efficient resource use.

Identify the characteristics and benefits of indexed equity mutual funds.

Understand the impact of cost changes on market supply and quantity.

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Definitions:

Average Costs

The total costs (fixed and variable) divided by the total output, indicating the cost per unit of output produced.

Decreasing Returns to Scale

A situation in which, when the scale of production is increased, the output increases at a proportionally lower rate.

Minimum Efficient Scale

The smallest level of production a company can achieve while still taking full advantage of economies of scale in terms of costs per unit.

Long-Run Average Cost Curve

A graphical representation showing the lowest average cost of producing any output level when all inputs can be varied.