If a Natural Disaster Were to Cause a Negative Long-Run

question 63

Multiple Choice

If a natural disaster were to cause a negative long-run supply shock to the economy, once the economy adjusts, the new equilibrium will be at a:

• A) higher price level and lower level of output.
• B) lower price level and higher level of output.
• C) higher price level and higher level of output.
• D) lower price level and lower level of output.

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Definitions:

Public Goods

Goods that are non-excludable and non-rivalrous, meaning they are available for everyone to use without diminishing their availability to others.

Market Failure

Market Failure occurs when the allocation of goods and services by a free market is not efficient, often requiring intervention.

Social Costs

The total cost to society, both direct and indirect, arising from the production or consumption of goods and services, including externalities.

Perfect Competition

A market structure characterized by an infinite number of buyers and sellers, homogeneous products, no barriers to entry or exit, perfect information, and no individual buyer or seller having any influence on the market price.