When positive externalities are involved, the market is said to
A. fail, because it underproduces the good connected with the positive externality.
B. fail, because it overproduces the good connected with the positive externality.
C. succeed, because it produces the socially optimal quantity of the good connected with the positive externality.
D. be "in optimum," because the equilibrium fully adjusts for the positive externality.
Answer: A
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In a one-period valuation model, a decrease in the required return on investments in equity causes a(n) ________ in the ________ price of a stock
A) increase; current B) increase; expected sales C) decrease; current D) decrease; expected sales
A risk-neutral person will invest in a project by examining if
A) the expected utility associated with the project is positive. B) the marginal utility associated with the project is positive. C) the expected net present value is positive. D) All of the above.
Olivia bakes cakes and Andrew grows corn. Olivia and Andrew both like to eat cake and eat corn. In which of the following cases is it impossible for both Olivia and Andrew to benefit from trade?
a. Olivia cannot grow corn and Andrew cannot bake cakes. b. Olivia is better than Andrew at baking cakes and Andrew is better than Olivia at growing corn. c. Olivia is better than Andrew at baking cakes and at growing corn. d. Both Olivia and Andrew can benefit from trade in all of the above cases.
When comparing two alternatives X and Y, a consumer either prefers X to Y, prefers Y to X, or is indifferent between them. This property is called:
A. transitivity. B. completeness. C. the ranking principle. D. the choice principle.