An externality can occur when:
a. a voluntary transaction between two individuals creates economic value.
b. a person's action affects another's wealth either positively or negatively.
c. a self-interested individual tries to maximize his/her profits.
d. a voluntary transaction between two individuals creates economic loss.
B
You might also like to view...
In making decisions about insurance:
A. using hindsight is the only way to truly know what the right decision was. B. you must consider it in light of the best information available at the time. C. you need to weigh the cost of the insurance against the benefit of payouts over the life of the contract. D. None of these statements is true.
Those who favor an active approach to policy and those who favor a passive approach disagree not only on how quickly the government can act but also on how stable the economy basically is
a. True b. False Indicate whether the statement is true or false
Assume that policy makers are pursuing a fixed exchange rate regime and that the economy is initially operating at the natural level of output. Which of the following will occur as a result of a revaluation?
A) The real exchange rate will be permanently higher in the medium run. B) The real exchange rate will be permanently lower in the medium run. C) The effects of this revaluation on the real exchange rate will be ambiguous in the medium run. D) The real exchange rate will be unchanged in medium run. E) The nominal exchange will initially fall in the short run and then increase in the medium run.
A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account.Refer to the above figures. Externalities exist in both panels. After correcting for the externalities the prices should be
A. P1 and P3. B. P1 and P4. C. P2 and P3. D. P2 and P4.