The trains of the Transcontinental Railway Company, when shipping goods, sometimes emit sparks that start fires along the tracks and damage the property of others. If Transcontinental does not pay for the damage it causes, what has occurred?
A. Positive externality.
B. Demand-side market failure.
C. Supply-side market failure.
D. All of these.
Answer: C
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Positive externalities are created by people when they
A) add to the net real income of society. B) are altruistic or concerned for the welfare of others. C) benefit others without intending to do so. D) increase the general welfare. E) promote the happiness of others.
When calculating the price elasticity of demand, which of the following conditions must be satisfied?
A) All other factors that influence demand must be held constant. B) Prices of related goods must be held constant but all other factors must be allowed to vary. C) Prices of related goods must be allowed to vary but all other factors must be held constant. D) All other factors than influence demand must be allowed to vary.