Optimal Allocation in Research and Development (R&D)

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In a perfectly competitive market with no externalities and increasing costs, why do economists typically not advocate for price and quantity controls?

To increase market instability

To encourage law breaking

To send the wrong price signals to producers and consumers

To prevent losses in welfare (correct)

What is the purpose of severance taxes when applied at the production level?

To encourage law breaking

To tax the resource at the production stage (correct)

To decrease market instability

To create a sustainable market

What type of taxes are more often used as ad valorem taxes in the context of energy production?

Income taxes

Tariffs

Severance taxes (correct)

Excise taxes

When energy is traded across borders, what type of tax is commonly applied?

Tariff Signup and view all the answers

In the competitive model provided, what is the equilibrium quantity when the price is set at 4.2?

$9.6 Signup and view all the answers

What happens to quantity demanded when a unit tax of three is imposed on a product in a competitive market?

Quantity demanded decreases Signup and view all the answers

How does demand price change with a unit tax?

It increases by the unit tax amount Signup and view all the answers

What is the purpose of adding three to the supply price when considering a unit tax?

To simulate the effect of a unit tax on demand price Signup and view all the answers

In a perfectly competitive market, what occurs when supply equals demand?

Equilibrium is achieved Signup and view all the answers

What does the inverse function Qs= -3+3Ps represent in a competitive market model?

Supply function Signup and view all the answers

Optimal Allocation in Research and Development (R&D)

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Questions and Answers

In a perfectly competitive market with no externalities and increasing costs, why do economists typically not advocate for price and quantity controls?

What is the purpose of severance taxes when applied at the production level?

What type of taxes are more often used as ad valorem taxes in the context of energy production?

When energy is traded across borders, what type of tax is commonly applied?

In the competitive model provided, what is the equilibrium quantity when the price is set at 4.2?

What happens to quantity demanded when a unit tax of three is imposed on a product in a competitive market?

How does demand price change with a unit tax?

What is the purpose of adding three to the supply price when considering a unit tax?

In a perfectly competitive market, what occurs when supply equals demand?

What does the inverse function Qs= -3+3Ps represent in a competitive market model?

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