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How would you evaluate a proposal to ban cigarette smoking? Would a ban on smoking necessarily be economically efficient?
Why might a tax on cigarettes induce the market for cigarettes to perform more efficiently?
Explain why cigarette smoking is often described as a good with negative externalities.
Why is it the case in a long-run monopolistically competitive equilibrium that the firm’s demand curve is tangent to its average cost curve? Why could it not be a long-run equilibrium if the demand curve “cut through” the average cost curve?
"What is the point of entering a perfectly competitive industry if it is simply to earn zero profits anyway?" Discuss this statement with reference to the long and short run, as well as to heterogeneity across firms.
Consider a monopolized industry. Is the deadweight loss from this industry greater if (1) the government sets price equal to average total cost or (2) the government sets price equal to marginal cost? Why? Use examples of monopoly form your own country to answer this question.
Why are price floors said to be inefficient? Can the government restore efficiency by imposing a production quota along with the price floor? Who benefits and who loses from such a program?
Why are price ceilings said to be inefficient? Can the government restore efficiency by imposing a production quota along with the price ceiling? Who benefits and who loses from such a program?
Consider a monopoly whose total function
Let us assume two goods, skis and bindings, that are perfect complements. That is one-for-one complements. Maureen spends all her equipment budget of US$1,200 per year on these two goods. Skis and bindings each cost US$ 200 per pair. What will be the income and substitution effects of an increase in the price of bindings to US$ 400 per pair?
