When a Negative Externality Exists in a Market,total Surplus

question 41

Multiple Choice

When a negative externality exists in a market,total surplus:

• A) is decreased by deadweight loss compared to that same market without a negative externality.
• B) is the same as a market without a negative externality.
• C) is increased by deadweight gain compared to that same market without a negative externality.
• D) is the same but re-distributed differently than if that same market did not have a negative externality.

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Definitions:

Speculative Motive

The intent to hold cash for the purpose of taking advantage of future financial opportunities that may arise.

Opportunity Cost

The loss of potential gain from other alternatives when one particular alternative is chosen.

Rate Of Interest

The percentage of an amount of money which is charged for its use per period of time, often expressed annually.

Unit Banking States

States in the U.S. where banks are required to operate only a single banking office, limiting their physical presence and expansion.