When a positive externality exists, _______________________ and thus _______________ intervention may be needed to achieve efficiency.
A. external costs are necessarily greater than private costs; government
B. social costs equal private costs; no government
C. social costs are less than private costs; government
D. social costs are greater than private costs; government
E. none of the above
Answer: C
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Return to the case of Jan, the hyperbolic discounter from the previous question. Suppose she can sign a contract that requires her to give up money equivalent to a loss of X utils if she does not undertake the action. Assume she does not behave consistent with her plans without this contract. How high would the contractual value of X have to be to prevent her inconsistency?
a. C – B/2. b. B. c. C. d. B + C.
The production function has ____ on the horizontal axis
a. real GDP b. capital stock c. technology d. labor input