In the Presence of Transactions Costs, the SML Will Be

question 25

Multiple Choice

In the presence of transactions costs, the SML will be

• A) a single straight line.
• B) a kinked line.
• C) a set of lines rather than a single straight line.
• D) a curve rather than a single straight line.
• E) impossible to determine.

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Definitions:

Common Resource

A natural or man-made resource where one person’s use diminishes other people’s access or enjoyment, but it is difficult to exclude anyone from using it.

Pollution Market Failure

Pollution market failure occurs when the environmental costs of pollution are not reflected in the market prices of goods or services, leading to overconsumption and excessive pollution.

Free Rider Problem

The issue arising when individuals benefit from resources, goods, or services without paying for them, which can lead to under-provision of those goods or services.

Public Goods

Non-excludable and non-rivalrous products or services that are accessible to all members of a society, such as public parks or national defense.