What are externalities, and how do they affect who pays the true cost of a polluting factory?
What will be an ideal response?
Externalities are the market effects felt either beneficially or detrimentally by third parties in a market exchange. Another way to look at this is that externalities are by-products affecting bystanders. An example would be when a factory gets rid of production waste more cheaply by polluting a river than by disposing of the waste in a manner that does not affect the environment. By polluting the river, the factory has a lower internal cost of production, a lower price of output, and thereby a larger quantity demanded of its product. What is not in the final price of the product is the external cost of the pollution paid by those living downstream and suffering health costs and loss of income.
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The total benefits to society from pollution abatement
A) increase at an increasing rate with the increase of pollution abatement. B) increase at a decreasing rate with the increase of pollution abatement. C) decrease at an increasing rate with the increase of pollution abatement. D) decrease at a decreasing rate with the increase of pollution abatement.
Intermediate goods are not included in GDP because:
A. certain goods that are used in the production of a final good would be counted twice. B. the value of goods bought by producers to make something else would be counted twice. C. the value of goods used by firms to make the goods they sell is included in the firm's product; accounting for the value twice would overestimate GDP. D. All of these statements are true
Assume that the central bank lowers the discount to increase the nation's monetary base. If the nation has highly mobile international capital markets and a fixed exchange rate system, what happens to the real risk-free interest rate and net nonreserve international borrowing/lending balancein the context of the Three-Sector-Model? State your answer after the macroeconomic system returns to
complete equilibrium. a. The real risk-free interest rate rises and net nonreserve international borrowing/lending balance becomes more positive (or less negative). b. The real risk-free interest rate remains the same and net nonreserve international borrowing/lending balance becomes more negative (or less positive). c. The real risk-free interest rate rises and net nonreserve international borrowing/lending balance becomes more negative (or less positive). d. The real risk-free interest rate and net nonreserve international borrowing/lending balanceremain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.
As the price level rises, ceteris paribus, people holding some of their wealth in monetary form become
A) less wealthy and they buy less. B) more wealthy and they buy more. C) less wealthy and they buy more. D) more wealthy and they buy less.