What is the consequence of a positive externality in a market? What is the consequence of a negative externality? Why those consequences occur?
What will be an ideal response?
A positive externality leads to the equilibrium quantity of goods in a market that is less than the efficient amount from the society's perspective. A negative externality leads to the equilibrium quantity of goods in a market that is more than the efficient amount. A positive externality is not taken into account by consumers and hence is not reflected in the position of the market demand curve. This leads to an equilibrium market quantity below the socially preferred level. In contrast, a negative externality is not taken into account by producers and hence is not reflected in the position of the market supply curve. This leads to an equilibrium market quantity above the socially preferred level.
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In the traditional Keynesian model, if the government cuts current taxes
A) the C + I + G + X line will shift down but the aggregate demand curve will not shift. B) the C + I + G + X line will shift down and the aggregate demand curve will shift to the left. C) the C + I + G + X line will shift up and the aggregate demand curve will shift to the right. D) the C + I + G + X line will shift up but the aggregate demand curve will not shift.
Potential buyers of older homes form their bids from imperfect estimates of a house's value As a consequence,
a. Lower quality houses are more likely to be up for sale b. Higher quality houses are more likely to be up for sale c. Both the higher and lower value houses would be offered for sale d. No houses would be offered for sale