Markets fail when externalities are present
a. because all of the costs and benefits of producing a good are reflected in the market price
b. because some of the costs and benefits of producing a good are not reflected in the market price
c. only if they are negative; positive externalities are not market failures
d. because profits are not maximized
e. if the positive externalities are less than the negative externalities
B
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Relative to the short-run demand for gasoline, the long-run demand for gasoline is
A) probably more elastic since people need time to change automobiles and driving habits. B) probably less elastic since people need time to change automobiles and driving habits. C) probably more elastic because people can hoard this good. D) probably less elastic because people cannot store this good.
Suppose a country abandons a no-trade policy in favor of a free-trade policy. If, as a result, the domestic price of beans increases to equal the world price of beans, then
a. that country becomes an exporter of beans. b. that country has a comparative advantage in producing beans. c. at the world price, the quantity of beans supplied in that country exceeds the quantity of beans demanded in that country. d. All of the above are correct.
(Figure: Productivity) Look at the figure Productivity. An improvement in technology with everything else remaining unchanged is shown on the diagram as a movement from
What will be an ideal response?
If a tariff on bikes causes domestic bike prices to rise by 20% and domestic value added in the domestic bike industry to rise by 30%, then
A) the nominal rate of protection of bikes is 20%. B) the effective rate of protection of bikes is 30%. C) the effective rate of protection is higher than the nominal rate. D) All of the above.