Explain how the introduction of an additional competitive market can always solve the efficiency problem that emerges from a positive externality.
What will be an ideal response?
Positive externalities (in either consumption or production) can be thought of as outputs that are consumed by non-paying "customers". If these outputs can be defined and property rights established, markets would allow trade in such outputs -- implying they would be priced and those giving rise to positive externalities would be compensated.
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If a stock's dividend is expected to grow at a constant rate of 6 percent in the future
and it has just paid a dividend of $2.50 a share, and you have an alternative investment of equal risk that will earn a 8 percent rate of return, what would you be willing to pay per share for this stock? A) $2.86 B) $33.13 C) $132.50 D) $200.00
When economies of scale exist:
a. per unit production costs increase as output expands b. per unit production costs decline as output expands. c. marginal cost must decrease as output expands. d. per unit production costs remain constant as output expands.
Which of these activities will most likely impose an external cost?
a. Betty plants flowers in her garden. b. Bonnie gets a flu vaccine. c. Bridget drives her car after having too much alcohol to drink. d. Becky buys a new flat screen television.
A firm will shut down in the short run if the total revenue that it would get from producing and selling its output is less than its
a. opportunity costs. b. fixed costs. c. variable costs. d. total costs.