An externality exists when
A) goods are sold in specific geographic locations.
B) some of the benefits or costs associated with a good are borne by third parties.
C) the government taxes a good.
D) the government subsidizes a good.
B
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After a temporary adverse supply shock hits the economy, general equilibrium is restored by
A) a shift down and to the left of the IS curve. B) a shift to the left of the FE line. C) a shift up and to the left of the LM curve. D) a shift down and to the right of the IS curve.
Suppose that when the price of wheat is $2 per bushel, farmers can sell 10 million bushels. When the price of wheat is $3 per bushel, farmers can sell 8 million bushels. Which of the following statements is true? The demand for wheat is
a. income inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. b. income elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. c. price inelastic, so an increase in the price of wheat will increase the total revenue of wheat farmers. d. price elastic, so an increase in the price of wheat will increase the total revenue of wheat farmers.
Stagflation describes a situation in the economy where the economy is
A. stagnant and prices are falling. B. growing and prices are falling. C. stagnant and prices are stable. D. stagnant and prices are rising.
Referring to Figure 18.3, the effect of a decrease in Japanese interest rates is represented by a movement from point:
A. b to a. B. a to b. C. b to c. D. a to d.