When a firm produces a product that creates external costs
A. the firm produces a level of output smaller than would be produced without the external cost.
B. the firm produces a level of output larger than would be produced without the external cost.
C. the firm produces a level of output which would be the same as it would produce without the external cost.
D. the market provides the efficient level of output even with the existence of the external cost.
Answer: B
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Sophie is willing to sell her soccer ball for $10. Ruby is willing to pay $20 for the soccer ball. Sophie and Ruby agree on a price of $16. The gains from trade for Sophie equals ________ and the gains from trade for Ruby equals ________.
A. $5, $5 B. $6, $4 C. $10, $20 D. $4, $6
A subgame-perfect equilibrium is a Nash equilibrium in which no player can make himself better off by changing his decision at any decision node
Indicate whether the statement is true or false
A reduction in the ratio of the money supply to GDP is
a. financial deepening b. inflation c. financial repression d. real interest rate e. none of the above
Dina drives to work on Interstate 294 at 90 MPH, well in excess of the 65 MPH speed limit. Sandy is behind her, going 85 MPH. A state trooper pulls Dina over and gives her a speeding ticket. Sandy continues driving. If Dina had not been speeding, the trooper would have ticketed Sandy. In terms of externalities, this story shows that
a. the 10 MPH difference defines the difference bewteen a negative and positive externality b. Sandy enjoys a positive externality c. Dina suffers a negative externality d. Dina's driving habits created a negative externality for Sandy e. Sandy's driving habits created a negative externality for Dina