Empirical studies show that countries with low standards are very successful at attracting foreign investment

A market failure in the form of an externality arises when

a. production costs are included in the price of a good b. not all costs and benefits are included in the price of a good c. the benefits of consuming a good exceed the costs d. a market fails to achieve equilibrium e. equilibrium price is unstable

Last year, the price of heating oil was $4 per gallon, and Jonetta purchased 100 gallons of heating oil. This year, the price of heating oil falls to $3 per gallon while Jonetta's income is unchanged. Jonetta decides to share her good fortune by giving her retired father a gift of $100. Consider an indifference curve-budget line diagram with heating oil on the horizontal axis and "all other goods" on the vertical axis.

(i) Does the price change make Jonetta's budget line flatter or steeper? Justify your choice. (ii) After Jonetta gives the $100 gift, will her new budget line lie above, lie below, or pass through her initial optimum? Justify your choice. (iii) Sketch an indifference curve-budget line diagram that illustrates this situation. This year, will Jonetta be better or worse off than she was last year?