The net increase to total surplus when a positive externality is corrected is due to:
A. the increased number of units bought and sold in the market.
B. the transfer of surplus from the consumer to those affected by the externality.
C. the transfer of surplus from those affected by the externality to the consumer.
D. None of these statements is true.
Answer: A
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Suppose the government levies a corrective tax on firms that pollute in order to limit the quantity of pollution. Under this policy, does the demand curve for pollution rights determine the quantity of pollution, or does it determine the price of pollution?
In the short run a decrease in the costs of production makes
a) output rise and prices fall. b) output and prices fall. c) output and prices rise. d) output fall and prices rise.
The Law of Supply suggests that the price-elasticity of supply is:
A. Positive B. Negative C. Always greater than 1 D. Always less than 1
An economic community
(a) attempts to raise prices by restricting quantity. (b) seeks to stabilize commodity prices. (c) seeks concessional loans. (d) imposes a common external tariff. (e) none of the above.