An externality can best be defined as
A. a consequence of a transaction that spills over to affect third parties.
B. a right of an owner to use and exchange property.
C. a cost associated with the production of one more unit of output.
D. a party not directly involved in a transaction.
Answer: A
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Indicate whether the statement is true or false
You get bit by your neighbor's dog, and incur $200 in emergency medical expenses. What happens to GDP?
A) It increases by $200. B) It decreases by $200. C) It remains unchanged. D) It depends upon whether you or the dog owner pays the medical bill.
A price taker is a buyer or seller who:
A. cannot affect the market price. B. takes the market price and chooses to increase or decrease it. C. takes prices in the area and averages them together to set the price for his/her good. D. can affect the market price, but only when collaborating with other buyers or sellers.
Suppose an American worker can make 20 pairs of shoes or grow 100 apples per day. On the other hand, a Canadian worker can produce 10 pairs of shoes or grow 20 apples per day. Canada has the ____________ opportunity cost of a pair of shoes than the United States, so: ____________.
A. higher; Canada should specialize in shoe production B. lower; Canada should specialize in apple production C. higher; Canada should specialize in apple production D. lower; Canada should specialize in shoe production