When a person does NOT have to pay the full costs for using a scarce resource, then there is

A) an underproduction of a good.
B) a negative externality.
C) a positive externality.
D) too little economic profit in the activity.


Answer: B

Economics

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Abstraction can be thought of as

A. avoiding reality in order to build theory. B. omitting unimportant details in order to understand complex phenomena. C. relying on absurdity to explain simplicity. D. making complex assumptions when simple facts are sufficient. E. stylizing reality rather than analyzing cause and effect.

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Taxing firms that emit pollutants is one way to reduce pollution.

Answer the following statement true (T) or false (F)

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If the government seizes Lucy's property and resells it to Ethel,

A) Lucy and Ethel collectively capture the resulting gains. B) Lucy captures the resulting gains. C) Ethel captures the resulting gains. D) Neither Lucy nor Ethel capture any resulting gains.

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A cartel is

a. a type of formal collusion. b. a type of informal collusion. c. characterized by a kinked demand curve. d. a form of monopolistic competition.

Economics