Answer the following questions true (T) or false (F)
1. Externalities always arise because of a failure of transferability.
2. The capitalized value of a constant stream of $20 per year given an interest rate of 4% per year is $800.
3. The prior appropriation doctrine is a system in which individuals have rights to specific quantities of water and these right can be sold to others.
1. FALSE
2. FALSE
3. TRUE
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Other things remaining the same, an increase in the price of butter can be expected to
A) increase margarine sales. B) decrease margarine sales. C) increase butter sales. D) None of the above
Suppose the market price for one unit of a good is $12.50, and 50 units will be exchanged at that price. If a price floor is imposed at $12.00 per unit, the price will: a. fall to $12.00, and quantity will fall below 50 units
b. fall to $12.00, and quantity will remain at 50 units. c. remain at $12.50, and quantity will rise above 50 units. d. remain at $12.50, and quantity will remain at 50 units.
Suppose the tax rate on interest income from saving were reduced
a. The income effect, but not the substitution effect, would tend to reduce private saving. b. The substitution effect, but not the income effect, would tend to reduce private saving. c. Both the income and substitution effect would tend to reduce private saving. d. Neither the income nor the substitution effect would tend to reduce private saving.
In competitive markets, a surplus or shortage will
A. cause changes in the quantities demanded and supplied that tend to intensify the surplus or shortage. B. cause changes in the quantities demanded and supplied that tend to eliminate the surplus or shortage. C. cause shifts in the demand and supply curves that tend to eliminate the surplus or shortage. D. never exist because the markets are always at equilibrium.