Which of the following is the best example of an action that imposes an external cost?
A. Wear and tear on your car as the result of frequent use.
B. Deterioration in the average quality of a house you own as the result of poor maintenance.
C. Water pollution from an upstream factory that increases the cost of providing clean water to downstream residents.
D. A rose garden on your property from which your neighbor gets much enjoyment.
Answer: C
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Because decreases in inflation increase aggregate spending and short-run equilibrium output:
A. the aggregate demand curve is downward sloping. B. the aggregate demand curve is upward sloping. C. the aggregate demand curve is horizontal. D. the short-run aggregate supply line is downward sloping.
When a citizens' group opposes expansion of the prison located in town, the basis of the opposition is that the larger prison will produce
a. a negative externality for the community b. a positive externality for the community c. more jobs in the community d. tax revenue for the community e. improved criminal justice options
An increase in government purchases, an increase in the interest rate, and an increase in consumption all shift the aggregate expenditure line upward
a. True b. False
If the price for a good was $5 and the government wanted the price to be $10, it would impose a $5 price floor
Indicate whether the statement is true or false