When Does an Externality Occur

question 122

Multiple Choice

When does an externality occur?

• A) when one person's production or consumption of a good affects another person
• B) when a producer's long-run average costs fall
• C) when a consumer's marginal utility from consuming a good increases
• D) when international trade leads to improvement in a country's economic welfare

Analyze the effects of specific taxes, such as luxury taxes and payroll taxes, on market behavior and economic equilibrium.

Evaluate the burden of tax shifting and tax incidence in various economic scenarios.

Understand the concept of elasticity in labor markets and its relevance to tax incidence and employer behavior.

Distinguish between different types of taxes (income, sales, excise) and their implications for taxpayers at various income levels.

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Definitions:

Skeletal

Relating to or functioning as a part of the skeleton, the internal framework of the body composed of bones and cartilage.

Immediate Responses

Quick reactions or adaptations by an organism or system immediately following a stimulus or change in the environment.

Nervous

Pertaining to the nervous system, which is a complex network of nerves and cells transmitting signals between different parts of the body.

Endocrine

Pertaining to glands that secrete hormones directly into the blood rather than through a duct, influencing various bodily functions.