Explain why an external benefit leads to an under-allocation of resources to the production of a good
What will be an ideal response?
An external benefit is the benefit associated with the consumption of a good that is not borne by the buyer. Rather, the benefit is borne by third parties. The buyer calculates the amount of the good to consume by comparing private benefits and costs. By ignoring the external benefit, the buyer consumes less of the good than would be the case if the buyer actually received the full benefits of consumption. Hence, society under allocates resources to the production of the good.
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A real flow in the circular flow diagram is
i. a firm's payments of wages to its workers. ii. a household's purchase of a new car. iii. a farmer's use of land to grow corn. A) ii and iii B) i only C) i and iii D) ii only E) i, ii and iii
"If the price of crude oil falls, the demand for gasoline will increase, so people will by more gas and the price of gas will go up." Is this statement true or false? Explain
What will be an ideal response?
Which of the following is true?
A) Employment and unemployment are both coincident with the business cycle. B) Employment and unemployment are both procyclical. C) Employment is procyclical and unemployment is coincident with the business cycle. D) Employment is procyclical and unemployment is countercyclical.
Price elasticity of demand is defined as
a. the percentage change in price divided by the percentage change in quantity demanded b. the percentage change in quantity demanded divided by the percentage change in price c. the change in quantity demanded divided by the change in price d. the change in price divided by the change in quantity demanded e. the quantity demanded divided by the price