Economists refer to externalities as an example of market failure when:
a. markets do not consider social costs as part of overall costs.
b. additional external costs are so high that the firm must shut down.
c. private costs are the same as costs to society as a whole.
d. citizens bring lawsuits to stop production that pollutes.
a. markets do not consider social costs as part of overall costs.
Because externalities represent a case where markets consider only some social costs, economists commonly refer to externalities as an example of market failure. For instance, when the externality of pollution exists, the supply curve no longer represents all social costs.
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Use the above table. Assuming constant opportunity costs, the opportunity cost of producing donuts in country Alpha is ________, and the opportunity cost of producing donuts in country Beta is ________
A) 1 donut; 0.17 donut B) 1 donut; 6 donuts C) 10 donuts; 12 pizzas D) 0.2 pizza; 1.67 donuts
The production possibilities frontier shows the ________ combinations of two products that can be produced in a particular time period with available resources
A) minimum attainable B) maximum attainable C) only D) equitable