A side effect of an action that affects the well-being of third parties is
A. a marginal cost.
B. a marginal private benefit.
C. an externality.
D. a and b
E. all of the above
Answer: C
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GDP excludes most nonmarket transactions. Therefore, GDP tends to ________.
A. underestimate the rate of inflation in the economy B. overestimate the rate of inflation in the economy C. underestimate the amount of production in the economy D. overestimate the amount of production of the economy
Imagine Tom's annual salary as an assistant store manager is $30,000, he owns a building that rents for $10,000 yearly, and his financial assets generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. Which of the following statements is true?
A. Tom has an opportunity cost of $41,000. B. Tom earns an accounting profit of $35,000. C. Tom experiences an economic loss of $6000. D. All of these are true.
If the PPF for two goods is a downward-sloping straight line, the resources used to produce those goods are equally well suited to the production of both goods
Indicate whether the statement is true or false
Refer to Figure 23.6 for a perfectly competitive firm. Assuming that points A, B, C and D are all above AVC, this firm will maximize profits by producing the level of output that corresponds to point
A. C. B. D. C. A. D. B.