Knowing That the Presence of Externalities Reduces Surplus,it Implies That

question 54

Multiple Choice

Knowing that the presence of externalities reduces surplus,it implies that:

• A) there are mutually beneficial trades waiting to be exploited so private parties have an incentive to solve the externality problem themselves.
• B) government needs to find them and correct the market.
• C) there are mutually beneficial trades waiting to be exploited, so government has an incentive to force those parties to solve the problem themselves.
• D) None of these statements is true.

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Definitions:

MRP Curve

The Marginal Revenue Product curve, which depicts the additional revenue generated by employing an additional unit of a resource or factor of production.

Demand

A schedule or curve that shows the various amounts of a product that consumers are willing and able to purchase at each of a series of possible prices during a specified period of time.

Price

The amount of money expected, required, or given in payment for something.

Marginal Revenue Product

The additional revenue generated by employing one more unit of a factor, such as labor or capital.