Explain why environmental damage would be classified as an externality.
What will be an ideal response?
An externality is an incidental consequence of some economic activity. In the case of environmental pollution, the effect is not necessarily intended. Rather, production or consumption results in a residual of some sort that pollutes. Examples are auto emissions, domestic sewage, and sulfur dioxide emissions from burning coal to generate electricity or refine minerals. The unintended “leftover” is the pollution in the form of an externality.
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If the supply of automobiles becomes more inelastic, then a tax on automobiles is
A) paid more by the buyers after the change than before. B) paid more by the sellers after the change than before. C) always split evenly between the buyers and the sellers. D) paid more by the government after the change than before. E) always paid entirely by the buyers.
Government standards for products sold in the domestic market can have the effect of protecting domestic producers from foreign competition
a. True b. False Indicate whether the statement is true or false
Gross domestic product (GDP)
a. always increases over time b. increases only if prices increase because the goods and services are measured in current prices c. increases only if output of good and services increase d. increases only if either prices increase or output increases, but not a combination of both e. increases with either an increase in prices or an increase in output, or a combination of both
Which of the following is a true statement about the process of cross-subsidization, given that a firm is selling two products?
A. The two products cannot have interdependent demand functions. B. The firm will sell both of its products at prices set above costs and the firm needs cost complementarities in the production of the two goods. C. The firm needs cost complementarities in the production of the two goods. D. The firm will sell both of its products at prices set above costs.