How does a positive externality in consumption reduce economic efficiency?
What will be an ideal response?
If there is a positive externality in consumption, people not directly involved in the consumption of the product capture some of the external benefits of the product being consumed. Since the consumer does not reap the entire benefit of consumption, the consumer's marginal benefit of consumption (the demand) is reduced. This results in the consumer consuming less of the product, leading to a market equilibrium which is less than the efficient equilibrium and resulting in a deadweight loss.
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A firm's demand for labor depends on, in part, the demand for the firm's product. To summarize this idea, economists say that the demand for labor is:
a. derived demand. b. marginal demand. c. secondary demand. d. monopsonistic demand.
One reason fewer antitrust cases have been brought before the courts is:
A. globalization has changed the competitive landscape. B. more and more firms are platform businesses. C. goods prices have declined. D. consumers have lost political power.
Which of the following is an international financial institution concerned primarily with monetary issues and international financial arrangements?
A. International Monetary Fund B. Group of Seven C. Group of Five D. European Union
As a percentage of total expenditures, spending on highways has _____ since 1970 . Spending on interest payments has _____ over the same time span
a. increased; increased b. decreased; decreased c. increased; decreased d. decreased; increased