An externality exists when
A) goods are sold in specific geographic locations.
B) some of the benefits or costs associated with a good are borne by third parties.
C) the government taxes a good.
D) the government subsidizes a good.
Answer: B
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One reason that explains why the short-run aggregate supply curve is upward sloping is:
A. sticky wages. B. cartels keeping prices artificially high. C. the lag involved with public policy making. D. the changing profit levels experienced by firms.
Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be:
a. greater than the average variable cost. b. equal to the average variable cost. c. less than the average variable cost. d. at its minimum.
If consumers won't pay more than $1.50 for a pack of gum and at $1.50 they will buy an almost infinite amount, price elasticity of demand at $1.50 is:
A. elastic. B. inelastic. C. perfectly inelastic. D. perfectly elastic.
Monetary stimulus is only helpful to an economy:
A. that is experiencing high inflation. B. that is in recession. C. experiencing significant negative externalities. D. with few public goods.