Negative externalities, such as air pollution, pose a social problem because they
a. benefit buyers but not sellers
b. are intended and are market derived
c. have a positive value for those who create them
d. have a negative value for those who create them
e. are difficult to internalize
E
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An answer to the question "How are goods produced?" determines:
A) who receives the goods that are produced. B) how tastes and preferences are determined. C) how resources are combined in the production of goods. D) the types and quantities of goods and services produced.
In Example 6.5 in the book, the authors use the observed production data from the U.S. carpet industry to show that small firms likely have constant returns to scale and that large firms likely have increasing returns to scale
Are returns to scale in this industry likely to continue increasing as these firms become even larger? A) Yes, the marginal products of labor and capital are known to be positive at all levels of output in the U.S. carpet industry, which implies continued increasing returns to scale. B) Yes, increasing returns are always observed in other countries that produce carpeting on large scale. C) No, the authors predict that returns to scale in carpet production will likely decline at some point. D) The authors do not provide any comments on this issue.