Explain the externality generated when a shepherd grazes sheep in a field that is common property that several other shepherds use
What will be an ideal response?
The shepherd allows his sheep to graze in the field until the marginal benefit of grazing there equals the marginal cost to the shepherd. However, by grazing his sheep in the field, the shepherd increases the cost of grazing to all the other shepherds. This occurs because less grass is available for all other sheep. Each shepherd's grazing decision affects the costs to all the others, but the shepherds do not consider the effects on others when making their own decisions.
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The U.S. oil industry has only a few firms in it, so an economists is likely to describe the industry as
A) a monopoly. B) an oligopoly. C) perfectly competitive. D) monopolistically competitive. E) Both answers C and D can be correct.
Nominal GDP is adjusted for price changes through the use of:
A. the Consumer Price Index (CPI). B. the Producer Price Index (PPI). C. the GDP price index. D. exchange rates.