When there is market failure due to a negative externality,
a. innocent people will suffer since it cannot be corrected.
b. setting price equal to marginal social cost will solve it.
c. the free market produces too little output.
d. externalities have been taken into account.
e. the best solution eliminates the externality entirely.
b
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In the above figure, a decrease in the expected profit will result in a movement from point E to
A) point F. B) point G. C) point H. D) point I.
There are two types of investment: ________ investment—the spending by business firms on equipment and structures, and planned spending on residential houses—and ________ investment—spending by business firms on additional holdings of raw
materials, parts, and finished goods. A) planned; gross B) planned; inventory C) fixed; gross D) fixed; inventory
If the Fed wishes to reduce unemployment during a recession then it should
a. increase the discount rate. b. decrease reserve requirements. c. sell government securities on the open market. d. Do any of the above.
In the very short-run period,
A. the price elasticity of supply is very elastic. B. the price elasticity of demand is very elastic. C. the cross elasticity of demand is very inelastic. D. the price elasticity of supply is very inelastic.