What are externalities, and how do they affect who pays the true cost of a polluting factory?
What will be an ideal response?
Externalities are the market effects felt either beneficially or detrimentally by third parties in a market exchange. Another way to look at this is that externalities are by-products affecting bystanders. An example would be when a factory gets rid of production waste more cheaply by polluting a river than by disposing of the waste in a manner that does not affect the environment. By polluting the river, the factory has a lower internal cost of production, a lower price of output, and thereby a larger quantity demanded of its product. What is not in the final price of the product is the external cost of the pollution paid by those living downstream and suffering health costs and loss of income.
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The marginal social benefit curve from a public good is found by horizontally summing the marginal benefit curves of all individuals
Indicate whether the statement is true or false
If a war interrupted oil production, which of the following would most likely happen in the short run?
a. Unit costs would decrease and there would be an upward movement along the aggregate supply curve. b. Unit costs would increase and the aggregate supply curve would shift upward. c. Unit costs would increase and the aggregate supply curve would shift downward. d. Unit costs would decrease and the aggregate supply curve would shift upward. e. Unit costs would increase and there would be movement along the aggregate supply curve.
The difference in prices for first-class and coach airline tickets exemplifies price discrimination
a. True b. False Indicate whether the statement is true or false
If increasing the hourly wage rate from $10 to $15 causes a worker to work 50 hours rather than 40, the worker's elasticity of labor supply is equal to:
A. 1.8. B. 0.05. C. 0.50. D. 2.