When private benefits are less than social benefits, it means that:
A. positive externalities are present in the market.
B. positive externalities are not present in the market.
C. negative externalities are not present in the market.
D. no externality of any kind is present in the market.
A. positive externalities are present in the market.
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What is the expected payoff of an investment that yields $1,000,000 with a probability of 0.001 and $0 with a probability of 0.999?
A. $1,000,000 B. $1,000 C. $10,000 D. $500,000
When a person wants to buy a used car, asymmetric information may land her with a “lemon” because:
a. neither she nor the dealer can know everything about the car. b. a used car is in a lower-risk category for insurance purposes. c. a used car that has been in an undisclosed accident could have alignment problems. d. the car dealer knows more about the car than she does.
The self-correcting tendency of the economy means that rising inflation eventually eliminates:
A. unemployment. B. exogenous spending. C. recessionary gaps. D. expansionary gaps.
Which of the following is true when an economy is in long-run equilibrium?
What will be an ideal response?