When negative externalities exist in the production of a good, the marginal social cost of producing the good:
A. is less than the marginal cost borne by the firm.
B. equals the marginal cost borne by the firm minus marginal cost borne by a third party that results from the production and consumption of the good.
C. equals the marginal cost borne by the firm plus the marginal cost borne by third parties from the production and consumption of the good.
D. is equal to the marginal benefit received by consumers if competitive markets exist and there is no government intervention.
Answer: C
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If an economic agent's returns to entrepreneurship is greater than his opportunity cost of entrepreneurship:
A) he will always make losses if he chooses to be an entrepreneur. B) he will most likely not choose to be an entrepreneur. C) he will always make profits if he chooses to be an entrepreneur. D) he will most likely choose to be an entrepreneur.
If the marginal propensity to consume (MPC) is 0.75 and if policy makers wish to increase real GDP by $300 million to fight a recession, then by how much would taxes have to change?
a. -$30 million b. -$50 million c. -100 million d. -300 million