Question

True or False

5. Market failure cannot occur if non-rival goods are excludable and producers can charge for them. As a percentage of GDP, spending on national defense has mainly declined since 1950. The total willingness to pay for a certain quantity of a good can be greater than the amount people actually spend. Whereas cost externalities cause inefficiency, benefit externalities are good for the economy and improve economic efficiency. 9. Language has a network externality. 10. Smoking imposes externalities on non-smokers, but non-smokers can also impose externalities on smokers.

Answer 1

True Reason: Market failure only occurs when goods are both non rival and no excludable True Reason: Defense spending for US has declined overtime since 1950 with main emphasis on unemployment benefits and social security True Reason: This makes way for a positive consumer surplus False Reason: They also lead to economic inefficiency unless they are incorporated to produce the socially efficient level of output True Reason: Its usefulness increases as more people share it the same way 10. False Reason: Not true. Smoking only imposes externalities to non-smokers