In a free-market economy, a product that entails a negative externality (additional social cost) will be
A. produced at the optimal level.
B. underproduced.
C. overproduced.
D. provided solely by the government.
Answer: C
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In the above table, if the market is perfectly competitive and unregulated, at the equilibrium output level
A) marginal private cost equals the marginal private benefit. B) marginal private cost is less than the marginal private benefit. C) marginal social cost equals the marginal private benefit. D) marginal social cost is greater than the marginal private benefit.
Assuming the Federal Reserve is targeting the interest rate, a decrease in money demand will
a. shift the LM schedule to the right. b. shift the LM schedule to the left. c. shift the IS schedule to the right. d. not shift the LM schedule. e. none of the above.
Competitive firms are able to set price above marginal cost when
A) the markup is less than the cost of going to another store. B) the markup is greater than the cost of going to another store. C) all consumers have full information. D) consumers know what other stores are charging.
Intra-industry trade refers:
a. to imports and exports within the same industry. b. to imports and exports originating in different industries. c. to international trade patterns predicted by the Heckscher-Ohlin model. d. to Ricardian comparative advantage.