What is meant by the term "internalizing an externality"? How does a Pigovian tax or subsidy internalize an externality?
What will be an ideal response?
Internalizing an externality refers to transferring the external benefit or cost to the producer or consumer that generates the externality. A Pigovian tax transfers a negative externality in production back to the producer, which reduces the supply of the product and results in an efficient level of output. A Pigovian subsidy transfers a positive externality in consumption back to the consumer, which increases the demand for the product and results in an efficient level of output.
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What does the short-run Phillips curve indicate about the tradeoff between inflation and unemployment?
What will be an ideal response?
In a model of consumption and leisure, a drop in the wage will cause workers to work more if tastes are quasilinear in consumption.
Answer the following statement true (T) or false (F)
A demand curve for The Steel Porcupines' concert tickets would show the:
A. number of tickets the box office is willing to sell at various prices. B. number of people who need tickets. C. quality of people who want to buy these concert tickets. D. number of tickets that people want to purchase at various prices.
Which of the following is an example of the law of demand?
A. An increase in the price of tablets is followed by an increase in the sale of tablets. B. A decrease in the price of milk has no effect on the amount of milk consumed. C. The amount of smartphones sold increases while the price of smartphones is constant. D. An increase in the price of magnetic optical disks is followed by a reduction in the amount of magnetic optical disks purchased.