Externalities are a measure of the divergence between social costs and private costs.
Answer the following statement true (T) or false (F)
True
The difference between social costs and private costs is equal to external costs. As long as external costs exist and the market fails to convey the full social cost, an externality (market failure) occurs.
You might also like to view...
If a natural monopoly is regulated using
A) a marginal cost pricing rule, the firm maximizes its profit. B) an average cost pricing rule, the firm incurs an economic loss. C) a total cost pricing rule, the firm will exit the industry. D) a marginal cost pricing rule, the firm incurs an economic loss. E) an average cost pricing rule, the firm maximizes its profit.
If a useful good or service exists in such abundance that anyone can readily obtain it without much effort,
a. it is not scarce, but it is an economic good. b. it is scarce, but it is not an economic good. c. it is scarce, and it is an economic good. d. it is neither scarce nor is it an economic good.
If firms in a monopolistically competitive market are earning economic profits, which of the following scenarios best reflects the change a representative firm experiences as the market adjusts to its long-run equilibrium?
A) Demand decreases and becomes less elastic. B) Demand increases and becomes less elastic. C) Demand increases and becomes more elastic. D) Demand decreases and becomes more elastic.
If the firm learns that the complicated technology can be made more stable with a few tweaks increasing the cost by 5.5million and increasing the probability of a launch to 50%. Is it worth for the firm to invest the $500,000 in tweaks?
a. No, because it decreases the total expected value b. Yes, because it increases expected value c. No, because it increases risk d. Yes, because tweaking is good