A positive externality exists when the actions of one party impose benefits on a second party.
Answer the following statement true (T) or false (F)
True
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A price floor is
a. a legal minimum on the price at which a good can be sold. b. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price floor. c. a source of inefficiency in a market. d. All of the above are correct.
Suppose a U.S. government program subsidizes the production of domestic sugar producers and places a tariff (tax) on the importation of sugar from other countries. This program
a. helps the producers of sugar, but increase the opportunity cost of obtaining it. b. promotes the production of goods that consumers value highly relative to cost. c. creates wealth, because the government is providing the subsidies and imposing the tariffs. d. will reduce the opportunity cost of obtaining sugar and therefore lead to lower sugar prices.
Gladys agrees to lend Kay $1,000 for one year at a nominal rate of interest of 5 percent. At the end of the year prices have actually risen by 7 percent.
A. Gladys earns extra real income. B. Kay loses extra real income. C. Kay receives extra real income. D. Neither party gains or loses if the loan is repaid.
Refer to the graph shown. When the market is in equilibrium, consumer surplus is equal to:
A. 1,000. B. 500. C. 1,500. D. 2,000.