For each bottle of wine that Italy produces, it gives up the opportunity to make 10 pounds of cheese. France gives up the opportunity to produce of 1 bottle of wine for every 25 pounds of cheese it produces. Which of the following is true about the
comparative advantage between the two countries?
A) Italy has the comparative advantage in cheese.
B) Italy has the comparative advantage in wine.
C) France has the comparative advantage in wine and cheese.
D) France has the comparative advantage in wine.
Answer: B
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When producers operate in a market characterized by negative externalities, a tax that forces them to internalize the externality will
a. give sellers the incentive to account for the external effects of their actions. b. increase demand. c. increase the amount of the commodity exchanged in market equilibrium. d. restrict the producers' ability to take the costs of the externality into account when deciding how much to supply.
External costs are those costs:
A. that are both social costs and private costs. B. that fall directly on an economic decision maker. C. that fall indirectly on an economic decision maker. D. that are imposed without compensation on someone other than the person who caused them.