Markets will underproduce goods that yield external benefits and overproduce those that generate external costs.
Answer the following statement true (T) or false (F)
True
The market fails by overproducing goods that have external costs and underproducing goods that have external benefits.
You might also like to view...
Which of the following relationships is likely to exhibit negative correlation?
A) The relationship between inflation in the U.S. and traffic congestion in China B) The relationship between amount saved with a bank and the interest earned C) The relationship between the amount of precipitation in a year and the number of umbrellas sold D) The relationship between level of professional training and unemployment
If perfectly competitive firms are maximizing their profit and are making an economic profit, the market ________ in a short-run equilibrium and ________ in a long-run equilibrium
A) is; is B) is; is not C) is not; is D) is not; is not E) is; might be
What is likely to happen to the allocation of resources if there is a sudden increase in the demand for a good produced by a perfectly competitive industry?
What will be an ideal response?
Refer to Figure 27-2. In the graph above, if the economy is at point A, an appropriate fiscal policy by Congress and the president would be to
A) execute an open market sale of government securities. B) increase marginal income tax rates. C) lower the discount rate of interest. D) increase government transfer payments.