Markets fail when externalities are present
a. because all of the costs and benefits of producing a good are reflected in the market price.
b. because some of the costs and benefits of producing a good are not reflected in the market price.
c. only if they are negative; positive externalities are not market failures.
d. because profits are not maximized.
e. if the positive externalities are less than the negative externalities.
B
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An economy experiences real growth over time with stable aggregate demand. This would likely result in
A) decreasing prices. B) increased unemployment. C) increasing prices. D) secular inflation.
Do underwriters normally run any kind of risk?
A) They risk being unable to sell the bonds they underwrite. B) They risk receiving a lower price than the commitment price to the bond issuer. C) They risk default on the bonds. D) No, their operations are generally risk-free.
Is the equilibrium efficient?
a. Yes, since they are both maximizing the utility b. No, since they could both get more utility c. One should keep the house clean d. None of the above
Combating the "greenhouse effect" does not create classic free-rider problems
a. True b. False Indicate whether the statement is true or false