It is possible that trade based on external scale economies may leave a country worse off than it would have been without trade. Explain how this could happen
What will be an ideal response?
One answer is that the terms of trade effects may dominate any other factors.
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The use of money
A. reduces the transaction costs of exchange B. eliminates the double coincidence of wants C. Allows for greater specialization D. All of the above
A plastics factory emits water pollutants into a nearby river. The marginal private cost of producing plastics and the marginal external cost of the pollutants are both constant with respect to the quantity of plastics produced
If the demand for plastics is downward sloping, what happens to the socially optimal level of output and market price if the demand curve for plastics shifts rightward? A) Optimal price and quantity increase B) Optimal price increases, optimal quantity remains unchanged C) Optimal price remains unchanged, optimal quantity increases D) Optimal price and quantity remain unchanged