Statement I

question 85

Multiple Choice

Statement I.We have market failure when our resources are not allocated efficiently.
Statement II.An oil refinery incurs both private and social (or external) costs.

• A)Statement I is true and statement II is false.
• B)Statement II is true and statement I is false.
• C)Both statements are true.
• D)Both statements are false.

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Definitions:

Unit of Account

A standard monetary unit of measurement of the market value/cost of goods, services, or assets.

Real Value

The value of an object or service adjusted for inflation, reflecting its true purchasing power.

Nominal Interest Rate

The interest rate stated on a loan or investment agreement, without adjustment for inflation.

After-tax Real Interest Rate

The interest rate received by lenders or paid by borrowers, adjusted for inflation and taxes, that reflects the true cost of borrowing or real yield on savings.