An externality can best be defined as
A) a party not directly involved in a transaction.
B) a consequence of a transaction that spills over to affect third parties.
C) a right of an owner to use and exchange property.
D) a cost associated with the production of one more unit of output.
Answer: B
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The phenomenon of equipment or structure going through "wear and tear" and eventually becoming obsolete is referred to as:
A) depreciation. B) capital tear. C) intertemporal loss. D) creative destruction.
According to the "square-root rule" of the transactions demand for money, the demand for money would
A) vary inversely with the interest rate. B) be zero if there were no costs to switching between money and interest-earning assets. C) vary less than proportionately with income. D) All of the above are correct.
Suppose you're looking for a new living room sofa and discover that the local store is running a Presidents' Day sale. You are delighted because if you end up buying the sofa, the sale will
a. increase the marginal utility you derive from that sofa b. increase your consumer surplus c. reduce your consumer surplus d. decrease the marginal utility you derive from that sofa e. increase the total utility you derive from that sofa
Which of the following would raise the wages of scientists and engineers?
A. An increase in the demand for innovative activities B. A decline in the level of legal protection of property rights over new inventions C. The immigration of skilled scientists and engineers from other nations D. A decline in the rate of return on research and development