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
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Explain why a relative price is an opportunity cost
What will be an ideal response?
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
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.
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.