What is an externality?
What will be an ideal response?
An externality is a situation in which private costs diverge from social costs because there are external costs. External costs are costs not borne by the parties engaged in the exchange or by an individual engaged in a resource-using activity.
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The terms of trade refer to:
A) rules and regulations that govern trade between nations. B) product of the opportunity cost of producing the same good in two trading nations. C) exchange rate of goods for goods. D) amount of money that has to be given up to import an additional quantity of a good.
Which of the following statements is false?
A) Anytime you have to decide which action to take you are facing an economic trade-off. B) Every individual, no matter how rich or poor, is faced with making trade-offs. C) Trade-offs do not apply when the consumers purchase a product for which there is excess supply, such as a stock clearance sale. D) Economics is a social science that studies the trade-offs we are forced to make because of scarcity.