In the presence of a negative externality generated by producing a good, a competitive market will produce more of that good than is socially optimal
What will be an ideal response?
True. Firms in that market only consider their private costs and produce a quantity that equates price with the private marginal cost. Producers ignore the external costs to others. As a result, p = instead of p = MCs.
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If the economy is characterized by a stable IS curve and an unstable LM curve, then ________ target produces ________ fluctuations in aggregate output
A) an interest rate; larger B) a money supply; smaller C) a money supply; larger D) an exchange rate; smaller
Exhibit 4-6 Demand and supply curves
If the market supply increases and, simultaneously, market demand decreases, the new equilibrium will show:
A. market price will decrease, and market quantity exchanged could increase, decrease, or remain unchanged. B. market price will increase, and market quantity exchanged will decrease. C. market price will increase, and the quantity exchanged could increase, decrease, or remain the same. D. market price could increase, decrease, or remain the same, and quantity exchanged will increase.
Cartel agreements are more likely to break down when
A) there are few variations in market demand. B) new firms enter the market. C) participating firms earn huge profits. D) none of the above.
Refer to the diagram where curves (a) through (e) are for five different countries. The Gini ratio is:
A. zero in country (e) and 1 in country (a).
B. greater in country (b) than in country (c).
C. zero in country (a) and 1 in country (e).
D. less than 0.5 in country (d).