An Externality Arises When a Person Engages in an Activity

question 464

Multiple Choice

An externality arises when a person engages in an activity that influences the well-being of

• A)buyers in the market for that activity and yet neither pays nor receives any compensation for that effect.
• B)sellers in the market for that activity and yet neither pays nor receives any compensation for that effect.
• C)bystanders in the market for that activity and yet neither pays nor receives any compensation for that effect.
• D)Both (a) and (b) are correct.

Understand how changes in the price of goods and their complements or substitutes affect demand.

Comprehend the concept of inferior and normal goods and how income changes impact demand.

Recognize how various factors such as income, prices of related goods, and changes in tastes or population can shift the demand curve.

Grasp the relationship between the price of goods and the quantity demanded according to the law of demand.

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Definitions:

Reasonable Notice Period

The period of time that employers or employees must give prior to terminating employment, considered sufficient under law or by common practice.

Damages

Compensation claimed by or awarded to a person as a remedy for loss or injury suffered due to another's negligence or wrongdoing.

Independent Contractor

A person or entity contracted to perform work for another entity as a non-employee.

Employment

The condition of having paid work, a job, or a professional occupation.