Economist A.C. Pigou argued that to deal with a negative externality in production, the government should impose a tax equal to the cost of the externality. What did Pigou believe should be done in the case of a positive externality in consumption? How
would his recommendation impact the demand and market equilibrium for the product which is generating the positive externality?
What will be an ideal response?
Pigou believed that, in the case of a positive externality in consumption, the government should give consumers a subsidy equal to the value of the externality. By giving a subsidy equal to the value of the externality, the external benefit will become a private benefit and demand for the product will increase to the point where the market equilibrium is also the efficient equilibrium.
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The government collects tax revenue of $100 million and has $105 million in outlays. The budget balance is a
A) surplus of $5 million. B) deficit of $5 million. C) surplus of $105 million. D) deficit of $105 million. E) surplus of $100 million and a deficit of $105 million.
What are the factors that change the supply of saving and shift the supply of loanable funds curve?
What will be an ideal response?
Opportunistic behavior is best described as a firm
A) gathering as much information as possible before dealing with another entity. B) attempting to make a profit from its dealings with another entity. C) firm trying to take advantage of another entity in its dealings with it. D) selecting another entity to deal with.
In the above table, what is the marginal factor cost of the 5th worker?
A) $22 B) $18 C) $90 D) $26