If a Market Solution Provides Greater Marginal Social Benefits Than

question 224

Multiple Choice

If a market solution provides greater marginal social benefits than marginal social costs, then:

• A) a positive externality is present.
• B) a negative externality is present.
• C) no net externality is present.
• D) any externality has already been internalized.

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Definitions:

Labor-Force Participation Rate

The rate of the labor force participants who are of working age, encompassing those in employment and those actively searching for a job.

Unemployment Rate

The proportion of the labor force that remains unemployed and is actively looking for ways to gain employment.

Cyclical Unemployment

Unemployment caused by the downturns of the economic cycle, such as recessions.

Natural Rate of Unemployment

The level of unemployment consistent with a stable rate of inflation, caused by the supply and demand for labor adjusting to various market factors.