Question

QUESTION 17 Suppose a firm produces pollution when it generates electricity. The cost of the pollution is called the private marginal cost. social marginal cost. marginal cost. external marginal cost QUESTION 18 Someone smoking in a crowded room is an example of a positive production externality. a negative production externality. a negative consumption externality. not an externality QUESTION 19 The cyclical deficit is the portion of the deficit created by business cycle fluctuations in GDP that is the result of nondiscretionary federal spending. the result of discretionary federal spending that would exist if the economy were at potential GDP. QUESTION 20 A subsidy paid to buyers to correct a market with a positive externality shifts the demand curve leftward supply curve leftward. supply curve rightward. demand curve rightward. QUESTION 21 Which of the following are correct? Private marginal cost external marginal costs social marginal costs Private marginal benefit+ external marginal benefit social marginal benefits. At an efficient equilibrium the social marginal benefits equal the social marginal costs o All of the answers are true. QUESTION 22 A negative consumption externality is a tax imposed on buyers of a good or service. decrease in consumer surplus. cost that arises from consumption and falls on someone other than the consumer cost that arises somewhere else and falls on the consumer. QUESTION 23 Which of the folowing appears in the capital account part of the balance of payments? a gift to an American from his English aunt a purchase by the Honda corporation of a U.S. Treasury bill income earned by the Honda corporation on its automobile plant in Ohio a purchase by the Bank of England of a U.S. Treasury bill

Answer 1

Option D.

• If a firm is producing pollution when it generates electricity, then the cost of pollution is referred to as external marginal cost.
• An external marginal cost refers to the cost incurred by a third party other than the producer when a firm decides to increase the production of an output by one unit which can harm other parties who were not directly involved in the transaction.