An externality is present in a free market whenever:
A. an activity generates costs or benefits that are not reflected in market prices.
B. a monopolist spends funds to keep potential competitors out of the market.
C. a tax is imposed on the supplier of a good.
D. firms hire employees from outside the firm to fill positions normally filled by promotion from within the firm.
Answer: A
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The primary motivation for private foreign investment in developing nations is
A) to eradicate poverty. B) to improve the standard of living for workers. C) the potential for high rates of return. D) to do research in countries with fewer social regulations.
In which of the following situations would you prefer to be the lender?
A) The interest rate is 9 percent and the expected inflation rate is 7 percent. B) The interest rate is 4 percent and the expected inflation rate is 1 percent. C) The interest rate is 13 percent and the expected inflation rate is 15 percent. D) The interest rate is 25 percent and the expected inflation rate is 50 percent.
When equilibrium is present in the foreign exchange market, which of the following will tend to be in balance?
a. the value of goods exported and the value of goods imported b. real and nominal interest rates c. imports plus capital outflow and exports plus capital inflow d. tax revenues and government expenditures
In Sen's view, development is an economic process that should be assessed by material output measures such as GNI per capita.
a. true b. false