There are 10,000 families in a neighborhood that are affected by noise pollution from a local factory. The noise could be reduced if the company spent $5,000 on technological improvements. The company agrees to make these improvements if the affected families contribute the $5,000. Since there are so many families, they fail to come to a resolution to which they will all agree. This outcome is an example of the
A. drop-in-the-bucket problem.
B. collective action problem (that arises when there are too many parties involved).
C. Coase theorem.
D. free-rider problem.
Answer: B
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In a market, at the equilibrium price
A) neither buyers nor sellers can do business at a better price. B) buyers are willing to pay a higher price, but sellers do not ask for a higher price. C) buyers are paying the minimum price they are willing to pay for any amount of output and sellers are charging the maximum price they are willing to charge for any amount of production. D) None of the above is true.
A financial strategy that reduces the chance of suffering losses arising from foreign exchange risk is referred to as
A) hedging. B) foreign exchange leverage. C) conversion depletion. D) transaction mitigation.
The ability to shift a tax burden depends on the relative elasticities of demand and supply for the taxed commodity.
Answer the following statement true (T) or false (F)
Externalities measure
A. Only costs of a market activity borne by a third party. B. Either costs or benefits of a market activity borne by a third party. C. Only benefits of a market activity borne by a third party. D. None of the choices are correct.