Which of the following statements is TRUE of external costs?
A) External costs should not be corrected since people will bear the costs whether they are corrected or not.
B) There are no good ways to correct for the external costs.
C) When external costs exist, the price of the good will be deceptively low leading to an overallocation of resources.
D) External costs should only be corrected for if the correction will not increase the market price.
Answer: C
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If stock prices follow a random walk,
a. speculation in the stock market destabilizes prices. b. a stock's past performance is not a good indicator of its future performance. c. rumors, news, and other "signals" have no effect on stock prices. d. the stock market does not participate in channeling resources toward firms with high stock prices.
There are two basic ways a nation can increase long-run real GDP
a. Create more money and increase government spending. b. Current account surpluses and education. c. Provide more and/or better inputs to the production process and improve the efficiency of the production process. d. Reduce nominal interest rates and increase consumption and investment. e. All of the above.