Which of the following illustrates the concept of a negative externality?

a. A college professor plays a vigorous game of racquet ball with the racquet he recently purchased.
b. A flood wipes out a farmer's corn crop.
c. A college student plays loud music on his new stereo system at 2:00 a.m.
d. A janitor eats a hamburger during his lunch break.


c

Economics

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Explain why a relative price is an opportunity cost

What will be an ideal response?

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Refer to Table 2-6. What is Lucy's opportunity cost of making a tricycle?

A) 3/4 of a wagon B) 2 tricycles C) 3 wagons D) 1 1/3 tricycles

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Suppose a company expects prices in general to rise by 5%, but the price of its product rises by 2%. How will the company respond to the price change?

A) It will increase production since it's getting a higher price for the product. B) It will increase production more slowly since it's price is rising more slowly than average. C) It will reduce production since it perceives a relative decline in the demand for its product. D) It will stop production and shut down until prices rise more quickly.

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If people leave bequests primarily because they are uncertain about the timing of their deaths,

A) the marginal propensity to consume out of a temporary change in income would tend to be higher than in the simple version of the LCH. B) unrealized capital gains from higher housing prices will probably lead to a higher consumption-to-income ratio than in the simple version of the LCH. C) increases in wealth from the stock market would be consumed over a longer time horizon than in the simple version of the LCH. D) A and C are both correct.

Economics