Voluntary agreements may not be a feasible method to internalize an externality when
A) the dollar value of the externality is large.
B) the externality is negative rather than positive.
C) there are significant transaction costs.
D) there are high taxes on the firms that cause the externalities.
Answer: C
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The second-largest component of aggregate expenditures in the United States is _____
a. consumption b. investment c. government expenditure d. imports e. exports
Sonny and his girlfriend are stranded on an island. Sonny can produce 8 cups of berries per day, or 3 ounces of honey. His girlfriend can produce 10 cups of berries per day, or 6 ounces of honey. Explain who has the absolute advantage in berry
production and who has the absolute advantage in honey production. Explain why the person who has the absolute advantage in berry production should not produce berries.
One way the government can boost the economy out of a recession is:
A. with public announcements telling the public to save their money. B. by increasing government spending. C. by setting price ceilings on most goods so people can afford them. D. None of these will help an economy in recession.
There has been a decrease in investment. As a result, real GDP will ________ in the short run, and ________ in the long run
A) increase; increase further B) increase; decrease to its initial value C) decrease; decrease further D) decrease; increase to its initial level