If the production of a good created both external costs and external benefits, but the external costs were greater, without government intervention, a market economy will:
a. not produce the product at all
b. overproduce the product.
c. underproduce the product.
d. produce the optimal amount of the product.
b
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Suppose the market clearing price for apples falls from $3.00 to $2.00 per pound, and the overall market clearing output decreases from 1 million to 1/2 million pounds. How can we explain the fall in price and fall in market output?
A) Supply decreased and demand remained unchanged. B) Supply remained unchanged and demand decreased. C) Demand increased and supply remained unchanged. D) Demand remained unchanged and supply increased.
The quantity produced in a monopolistically competitive market is ________ than the quantity produced in a perfectly competitive market, and the price charged in a monopolistically competitive market is ________ than the price charged in a perfectly
competitive market. A) higher; higher B) lower; higher C) higher; lower D) lower; lower
In economics, the study of the decisions of firms in industries where the profits of each firm depend on its interactions with other firms is called
A) profit analysis. B) market structure analysis. C) game theory. D) decision theory.
An example of a heuristic is:
A. predatory lending. B. a framing device. C. common sense. D. a rule of thumb.