What are pecuniary externalities? Explain with the help of an example
What will be an ideal response?
A pecuniary externality occurs when a market transaction affects others through market prices. For example, if a large number of consumers decide to purchase a car, the price of the car will increase due to an increase in demand. This creates a pecuniary externality for other potential buyers of the car in the form of higher prices.
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Suppose that for Jim the marginal benefit (MB) of producing is $60 and that the marginal cost (MC) of producing is $10. Suppose also that his marginal benefit of stealing is $50 and the marginal cost of stealing is $10. Is Jim currently maximizing utility in terms of producing and stealing? If not, should he produce more and steal less, or produce less and steal more to move toward utility maximization?
A. Yes, Jim is maximizing utility. B. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is less than the MB/MC ratio for stealing, Jim should produce more and steal less. C. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should produce more and steal less. D. No, Jim is not maximizing utility. Since the MB/MC ratio for producing is greater than the MB/MC ratio for stealing, Jim should steal more and produce less.
Suppose you purchase a bond with a coupon of $30 for $1025. You sell it one year later for $1050. What rate of return did you earn? Report a percentage with two decimal places
What will be an ideal response?
A firm that faces a downward sloping demand curve is
A) a price taker. B) a price provider. C) a price searcher. D) a price creator.
The primary benefit that results when a nation employs its resources in accordance with the principle of comparative advantage is
What will be an ideal response?