The purchase of fire extinguishers by apartment dwellers provides benefits to their neighbors. Explain why this situation leads to an inefficient outcome
What will be an ideal response?
When the person renting an apartment buys a fire extinguisher, the decision is based on the utility the person expects to receive from owning it. However, if his neighbor also receives utility from his purchase of the fire extinguisher, its true social value will not be reflected in the price. Thus, too few fire extinguishers will be purchased.
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Which of the following is the best example of a quota?
a. a tax placed on all small cars sold in the domestic market b. a limit imposed on the number of men's suits that can be imported from a foreign country c. a subsidy from the U.S. government to domestic manufacturers of men's suits so they can compete more effectively with foreign producers of men's suits d. a $100-per-car fee imposed on all small imported cars
Measured as a share of GDP, federal spending during 2001-2010
a. increased more rapidly than during the 1990s. b. increased less rapidly than during the 1990s. c. declined after increasing rapidly during the 1990s. d. was virtually unchanged during the decade.