Compared to ideal economic efficiency, when the production of a good generates external costs, competitive markets will result in an output that is too:
A. large and a price that is too high.
B. large and a price that is too low.
C. small and a price that is too high.
D. small and a price that is too low.
Answer: B
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The Sandy Deli operates near a college campus. It has been selling 325 sandwiches a day at $1.75 each and is considering a price cut. It estimates 450 sandwiches would sell per day at $1.50 each. Calculate the marginal revenue of such a price cut and the elasticity between the two points.
What will be an ideal response?
One-third of the world's population live in China and India. How did the growth rate of these two countries compare with the growth of high income industrial countries during 1980-2009?
What will be an ideal response?
For a given nominal interest rate, a reduction in expected inflation will cause
A) a reduction in the real interest rate. B) an increase in the real interest rate. C) an increase in investment. D) an increase in money demand.
The income effect means that when the price of a good rises
A. you buy more normal goods and fewer inferior goods. B. the buying power of your income falls. C. your preferences also change. D. consumers have an incentive to consume less of the good with a relatively higher price and more of the good with a relatively lower price.