Most economists believe that:
A. all spillover costs should be eliminated.
B. spillover costs should be considered in determining optimal output.
C. the control of spillovers is costless.
D. spillover costs do not cause a misallocation of resources.
Answer: B
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If the price of a good is below the equilibrium price,
a. suppliers will find inventories building; they will cut output and raise prices. b. suppliers will find inventories being depleted. They will increase production and raise prices. c. the demand curve will shift down until an equilibrium is established at the existing price. d. the supply curve will shift up until an equilibrium is established at the existing price.
Baumol and Blinder argue that oligopolies are interdependent firms. What do they mean by this? Give three examples of the types of interdependence which might occur