When a person does not have to pay the full costs for using a scarce resource, then there is
A) an underproduction of a good.
B) a negative externality.
C) a positive externality.
D) too little economic profit in the activity.
B
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On a traditional supply and demand diagram,
A. price is measured along the horizontal axis and quantity along the vertical axis. B. price is measured along the vertical axis and quantity along the horizontal axis. C. quantity demanded is measured along the horizontal axis, quantity supplied is measured along the vertical axis, and price is indicated on the contour lines. D. quantity is measured along both axes and price is indicated on the contour lines.
When you chose to buy the second cup of coffee instead of the third bagel, which of the following is necessarily CORRECT?
A) The second coffee will give you higher marginal utility. B) The second coffee is cheaper than the third bagel. C) The marginal utility per dollar from the third bagel is less than the marginal utility per dollar from the second coffee. D) Both answers A and C are correct.
The cost of capital to a firm is equal to
A) a risk-free rate plus an equity premium. B) a risk-free interest rate. C) an equity premium charged by lenders. D) the Treasury bill rate minus an equity premium.
The ceteris paribus assumption is important to use when building economic models
Indicate whether the statement is true or false