Provide an example of a positive externality and explain: 1) why it should be considered a positive externality and 2) what could be done in order to internalize the externality.
What will be an ideal response?
Answers may vary, but some classic examples are: asking questions during a class, renovating a house, conduct scientific research, etc. In each case, a person is facing costs for doing something that benefit everyone. The way to solve them would be to somehow charge others, or to compensate from a public fund.
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If a nation can produce a good or service at the lowest opportunity cost, then it
A) might export or import the good, depending on whether or not it has a comparative advantage in the production of the good. B) can sell the product at a lower price than other nations. C) will definitely import the good because it can beat other countries' prices. D) does not want to export the good because the low cost means it makes only a low profit. E) is best for the nation to not trade the good internationally.
Which of following is NOT true of the equilibrium price?
A. Sellers who are willing to accept the equilibrium price can sell what they produce. B. It is fair in the sense that everyone can afford basic goods and services. C. It measures the value of the last unit sold to consumers. D. Buyers who are willing to pay the equilibrium price can acquire the good.
The political business cycle is:
A. not apparent in either GDP data or personal disposable income data. B. more apparent in GDP data than in personal disposable income data. C. less apparent in GDP data than in personal disposable income data. D. equally apparent in GDP data as in personal disposable income data.
XYZ Inc. announces plans to finance the expansion of the firm by issuing hundreds of millions of dollars of bonds. Discuss how the current stockholders of XYZ Inc. will feel about this plan.
What will be an ideal response?