With defined property rights, an externality
A) can only be corrected with government intervention.
B) will not lead to a misallocation of resources.
C) may be internalized with voluntary contracting, under certain circumstances.
D) must lead to society producing inside its production possibilities frontier.
Answer: C
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If the CPI basket of goods cost $200 in the reference base period and $450 in a later year, the CPI in the later year equals
A) 225. B) 250. C) 300. D) 450.
A downward shift in the consumption function can be caused by:
a. expectations of higher inflation. b. an increase in wealth. c. a lower price level. d. none of these.
A firm enjoys a positive economic profit when:
a. the demand curve touches the average cost curve at the profit-maximizing level of output. b. the marginal revenue curve has a negative intercept on the ordinate axis. c. the average revenue curve lies below the average cost curve at the profit-maximizing level of output. d. the marginal cost is declining at the profit-maximizing level of output. e. the average revenue curve lies above the average cost curve at the profit-maximizing level of output.
If the current year CPI is 90, then the price level has decreased 10 percent since the base year
a. True b. False Indicate whether the statement is true or false