Question from Past Microeconomics Qualifying ExamEdit
Spring 2001 - Section I, Question Eight, George Mason University
State first whether the following statements are true, false, or uncertain. Then briefly explain your reasoning in four or five sentences. You may use a graph if it helps clarify your answer.
The tragety of the commons can only arise if the average product is higher than the marginal product.
Between the place where Marginal Product goes negative and Average Product goes negative there is a place where, if the actor does not absorb the full cost (not shown here) then there will be more than efficient production.
True, but only where marginal product is negative.
Addition: As long as average product is positive individuals will enter the market even at a negative marginal product if there is an uninternalized cost to their action (obviously not always because then all goods would be public goods). Average product will therefore fall further until at its intercept with the X axis the incentive to enter is removed.
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