If the production of a good causes pollution (an external cost) is the unregulated competitive market equilibrium of that product efficient?
What will be an ideal response?
The presence of pollution means that the supply curve of the firm, which is also the firm's marginal cost curve, only represents the firm's private costs and ignores all external costs. The equilibrium between supply and demand curves leads to overproduction of this good. The amount produced, therefore, is not efficient because the level of production occurs where the marginal private cost equals the marginal social benefit rather than where the marginal social cost equals the marginal social benefit.
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Money is not subject to the law of diminishing marginal utility
Indicate whether the statement is true or false
The North American Free Trade Agreement and the European Union are examples of
A) defense treaties. B) regional trade blocs. C) labor agreements designed only for industrialized countries. D) agriculturally based economies.