Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use
What will be an ideal response?
The shepherd allows his sheep to graze in the field until the marginal benefit of grazing there equals the marginal cost to the shepherd. However, by grazing his sheep in the field, the shepherd increases the cost of grazing to all the other shepherds. This occurs because less grass is available for all other sheep. Each shepherd's grazing decision affects the costs to all the others, but the shepherds do not consider the effects on others when making their own decisions.
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Which of the following statements is CORRECT?
A) When demand increases, both the price and the quantity increase. B) When demand decreases, the price rises and the quantity decreases. C) When supply increases, the quantity decreases and the price rises. D) When supply decreases, both the price and the quantity decrease.
The discovery of new natural resources will cause
A) the economy to move closer to the production possibilities curve. B) the production possibilities curve to shift up and to the right. C) an upward movement along the curve. D) the curve to shift back and to the left.
Studies indicate that the demand for fresh tomatoes is much more elastic than the demand for salt. These findings reflect that
a. tomatoes are a necessity while salt is a luxury. b. it takes longer for consumers to adjust to a change in the price of salt than to a change in the price of tomatoes. c. salt will not spoil as easily as fresh tomatoes. d. more good substitutes exist for fresh tomatoes than for salt.
As the availability of a non-renewable resource decreases, we would expect
a. Rising prices and increased production b. Rising prices and decreased production c. Rising prices and stable production d. Falling prices and increased production e. Falling prices and decreased production