38For Factor Markets, what determines a firm’s profit-maximizing hiring decision?
39Firms will maximize profits by hiring any factor until MFC = MRP
40If MU/P for good A is less than MU/P for good B, what should a rational consumer do?
41A rational consumer should buy less A and more B until MU/P is equal for both goods
42If Marginal Private Benefit (MPB) is less than Marginal Social Benefit (MSB), what is likely the reason? How could this be ‘fixed’
43A Positive Externality, use a PER UNIT subsidy to increase output to Social optimal level
44If Marginal Social Cost (MSC) is greater than Marginal Private Cost (MPC), what is likely the reason? How could this be fixed?
45A Negative Externality, use a PER UNIT Tax to decrease output to the social optimal level
46If the Gini Coefficient is higher than most countries… what does this mean? What could a country do to effectively decrease the Gini Coefficient?
47High Gini Coefficient means more unequal INCOME DISTRIBUTION High Gini Coefficient means more unequal INCOME DISTRIBUTION. Gov’t could impose a PROGRESSIVE tax or some other policy to re-distribute wealth from upper to lower class.
48What graph will always be both ALLOCATIVELY and PRODUCTIVELY efficient?
49A firm in PERFECT COMPETITION – in Long-Run Equilibrium