Under the market mechanism, a market characterized by external costs will produce too
A. Little output and too little pollution.
B. Much output and too much pollution.
C. Much output and too little pollution.
D. Little output and too much pollution.
Answer: B
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According to the income effect, when the price of automobiles rises, people buy fewer automobiles because
a. they substitute other forms of transportation for driving. b. the nominal amount of their paychecks is smaller. c. the purchasing power of their income is reduced. d. their demand for automobiles is very elastic.
Explain what is meant by the time inconsistency of monetary policy
________: the cost of all the factors of production used by a firm
Fill in the blank(s) with the appropriate word(s).
If the price were $60, this firm would _________ in the short run and __________ in the long run.
A. shut down; stay in business
B. shut down; go out of business
C. operate; stay in business
D. operate; go out of business