If You Are a Government Official, Under Which of the Following

question 243

Multiple Choice

If you are a government official, under which of the following situations would you opt for a command and control solution to an externality problem?
I. Lack of running water in part of the country is exacerbating the spread of cholera in the population.
II. Foreign ships are dumping toxic wastes in the waters off your country's shores.
III. A large number of banks fail due to excessive risk taking.

• A) I only
• B) I and II only
• C) II and III only
• D) I, II, and III

---

Definitions:

Great Depression

A severe worldwide economic downturn that took place during the 1930s, marked by mass unemployment, deflation, and a significant drop in demand and production.

Full Employment Output

The highest level of output an economy can achieve without causing inflation, when labor resources are fully employed.

The Classicals

Refers to the classical economists, a group that primarily includes thinkers like Adam Smith, David Ricardo, and John Stuart Mill, who focused on the ideas of free markets, the theory of comparative advantage, and the role of government.

Short Run

A period in economics during which some factors of production are fixed, typically under a year, making some adjustments impossible or difficult.