Why do externalities arise?
a. The costs of production are not borne by the producer.
b. An economic activity imposes a burden on those who are not directly involved in it.
c. The consumption of a public good is nonexcludable.
d. The government produces goods and services which are consumed by only a particular group of people.
e. Goods of mass consumption are not produced as they do not yield profit for the producers.
b
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Expansionary fiscal policy should be used if:
A) aggregate demand-aggregate supply equilibrium is below potential output. B) aggregate demand-aggregate supply equilibrium is above potential output. C) aggregate demand-aggregate supply equilibrium is equal to potential output. D) none of the above.
An oligopolistic situation involving the possible creation of barriers to entry would probably best be modeled by a
A) cooperative game. B) Prisoners' Dilemma game. C) Battle of the Sexes game. D) repeated game. E) sequential game.