A Paint Firm Has Just Announced That It Will Be

question 42

Multiple Choice

A paint firm has just announced that it will be building a new plant in a small town that is currently experiencing a high level of unemployment. The new plant will create 500 new jobs in the area and will occupy unused land at the edge of town. The plant will also dump some harmful chemicals into the town's river. From an economic standpoint this dumping of chemicals

• A) is unimportant since the firm is reducing the unemployment in the region.
• B) creates a negative externality.
• C) is the production of a public good.
• D) creates a positive externality.

---

Definitions:

Vivid Memory

A particularly clear and detailed memory of an event or moment, often with emotional significance, that remains strong over time.

Ignoring Base Rates

Involves disregarding statistical information in favor of anecdotal evidence when making judgments.

Availability Bias

A cognitive bias that makes people overestimate the importance of information that is available to them, leading to a misrepresentation of reality.

Gambler's Fallacy

The erroneous assumption that an event occurring with greater regularity than usual in a specific timeframe will occur less often in the future, and the opposite.