If a negative externality exists, then there is a __________ when society produces the market output instead of the socially optimal output. This exists because the __________ to sellers and third parties are __________ the __________ derived by buyers.
A. net social benefit; costs; greater than; benefits
B. net social cost; benefits; less than; costs
C. net social cost; costs; greater than; benefits
D. net social cost; costs; less than; benefits
E. none of the above
Answer: C
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Which of the following is a solution to the principal-agent problem?
A) threaten to liquidate the firm B) link top manager salaries to the profits of the firm or the price of the firm's stock C) have the CEO be a rotating position D) forbid managers from owning any company stock
The CEO of Banner Enterprises adopts a new welfare policy for all employees. The policy states that the company will prevent wages from falling when there is an economic downturn, but the employees should not expect huge salary increases when the economy is strong again. This is an example of _____
a. the efficiency wage theory b. an implicit contract c. a seasonal contract d. an adverse selection
The strong demand for housing, rising housing prices, and a construction boom from 2000 to 2005 were a result of
a. market forces that were eventually cut short by the stock market crash of 2008. b. policy changes that had positive initial effects, but negative long-term effects. c. tightened mortgage lending standards that reduced the risks of obtaining a home mortgage. d. the rising interest rates of that period, which increased the demand for housing.
What are the three economic uses of time?
a. Social work, nonmarket work, and leisure b. Nonmarket work, voluntary service, and leisure c. Acquiring skills, voluntary service, and social service d. Market work, nonmarket work, and leisure