A competitive firm pollutes the air. The following graph shows the demand for the firm's product and the private and social marginal cost curves. The numbers in the graph indicate areas.

Suppose:

• transactions costs are so high that negotiation is impossible
• it would cost the neighbors $6 to move.
• there is no legal penalty for pollution.

22.Do the neighbors move? Why or why not? What is the social gain?

Suppose:

• transactions costs are so high negotiation is impossible
• it would cost the neighbors $6 to move
• the firm is legally required to reimburse the neighbors for all pollution damage.

23.Do the neighbors move? Why or why not? What is the social gain?

The residents of Alphaville and Betaville are identical in their tastes and opportunities, except that those in Alphaville hate crowds quite intensely while those in Betaville consider crowding to be only a mild annoyance. Each town has a free aquarium.

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24.True or False:Crowding at the Betaville aquarium has a lower social cost than crowding at the Alphaville aquarium.

25.Explain the reason for the following phenomenon: At parties in which several conversations are simultaneously in progress, it is common for everybody to be shouting to be heard over everybody else, whereas they would all be heard better (and save wear and tear on their vocal chords) if they all spoke in normal tones of voice.

26.True or False:Devices like "50 cents off" coupons are used only under competition, since a monopolist can always require his customers to pay full price.

27.True or False:If Jack Daniels whiskey sells for $10 a bottle and if 1,000 bottles were sold last year, then the total value of those bottles to consumers was $10,000.

28.True or False:Profits will be positive as long as marginal revenue is greater than marginal cost.

29.True or False:When people have identical tastes, an increase in the demand for a common property's use will increase the social gain it creates.

30.True or False:A monopoly's supply curve is the portion of its marginal cost curve that lies above its average variable cost curve.