External costs can be defined as
A. the cost associated with private production, but partially borne by society.
B. the cost of providing all public goods and services.
C. the cost of running the federal government.
D. the sum of all private production costs.
Answer: A
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Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 300 lattes were consumed. What might have caused this change?
A) The price of tea (a substitute for cafe lattes) rose. B) The price of tea (a substitute for cafe lattes) fell. C) The price of coffee beans (an input of production of cafe lattes) rose. D) The price of coffee beans (an input of production of cafe lattes) fell.
All of the following are possible private-sector adjustments to an increase in the government's budget deficit except
A) increasing private savings. B) decreasing investment. C) decreasing expenditures on transfer programs. D) increasing the trade deficit by increasing imports and/or decreasing exports.
If income were distributed solely according to marginal productivity,
a. every family would be above the poverty level b. it would be distributed evenly c. it would be distributed normally d. workers in capital-intensive industries would earn less than workers in labor-intensive industries e. some individuals would not receive any income
The interest rate effect explains that higher prices
a. make it more expensive to borrow, leading to higher interest rates and less investment b. make people worse off by reducing the value of their wealth, leading them to save more and spend less c. decrease borrowing, leading to higher interest rates and less investment d. decrease borrowing, leading to lower interest rates and more investment e. increase borrowing, leading to higher interest rates and less investment