Economists refer to externalities as an example of market failure when:
a. markets do not consider social costs as part of overall costs.
b. additional external costs are so high that the firm must shut down.
c. private costs are the same as costs to society as a whole.
d. citizens bring lawsuits to stop production that pollutes.
a. markets do not consider social costs as part of overall costs.
Because externalities represent a case where markets consider only some social costs, economists commonly refer to externalities as an example of market failure. For instance, when the externality of pollution exists, the supply curve no longer represents all social costs.
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If the Fed is worried about inflation and wants to raise the interest rate, in the short run it can
A) increase the demand for money. B) decrease the demand for money. C) increase the quantity of money. D) decrease the quantity of money. E) directly raise the interest rate without affecting either the demand for money or the supply of money.
In a perfectly competitive industry, firms are likely to:
A.) Exit when there are economic profits because they know the profits will not last. B.) Reduce the level of production when there are economic profits. C.) Enter when there are economic profits. D.) Enter when price is equal to the minimum average total cost.
The larger the number of firms in an industry
A) the more intense the rivalry among firms. B) the larger the potential number of market segments. C) the easier it is to implicitly collude to fix prices. D) the greater the need for a price enforcement mechanism.
If a vacation in Paris is a normal good, other things being equal, an increase in consumer income will increase the demand for travel to Paris
a. True b. False Indicate whether the statement is true or false