In a market where there are external or spillover costs associated with consumption and production, the equilibrium will not be efficient because:
A. price will be greater than MC.
B. firms will shut down until costs are reduced.
C. too many resources will be allocated to production of the good.
D. costs of production will, on average, be too high.
Answer: C
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The statutory incidence of a tax is the same as the economic incidence of a tax whenever a tax is levied on a side of a market that is perfectly price-inelastic.
Answer the following statement true (T) or false (F)
When the price level falls
A. aggregate demand shifts to the left. B. all prices of individual goods and services decrease. C. aggregate demand shifts to the right. D. aggregate quantity demanded increases.
Along with currency not in banks and deposits in checking accounts, what is another component of the M1 measure of money?
A. credit cards B. debit cards C. traveler's checks D. prepaid accounts
The theory of new Keynesian inflation dynamics suggests that a fall in aggregate demand would
A. immediately raise the price level, followed by a more sluggish decline in real Gross Domestic Product (GDP). B. immediately reduce the price level, followed by a more sluggish decline in real Gross Domestic Product (GDP). C. immediately raise real Gross Domestic Product (GDP), followed by a more sluggish increase in the price level. D. immediately reduce real Gross Domestic Product (GDP), followed by a more sluggish decline in the price level.