How does a negative externality in production reduce economic efficiency?
What will be an ideal response?
If there is a negative externality in production, consumers not directly involved in the consumption of the product pay some of the external costs of producing the product. Since the producer does not bear the entire cost of production, the producer produces more than the economically efficient amount of the product.
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Suppose the equilibrium real federal funds rate is 5 percent, the target rate of inflation is 3 percent, the current inflation rate is 5 percent, and real GDP is 4 percent above potential real GDP
If the weights for the inflation gap and the output gap are both 1/2, then according to the Taylor rule the federal funds target rate equals A) 1 percent. B) 9 percent. C) 13 percent. D) 17 percent.
In a market system, intermediaries in the exchange process are known as
A) producers. B) consumers. C) middlemen. D) free agents.
Controlling market behavior that might prevent competition among all firms in the market
a. social regulation b. economic regulation c. antitrust policy d. none of the above
Given the above graph, as you move from point A to point B,
A. output is unchanged. B. cost is unchanged. C. the rate at which the firm can substitute labor for capital while holding output constant decreases. D. both a and b E. both a and c