Markets tend to overproduce goods that generate external costs.
Answer the following statement true (T) or false (F)
True
When external costs are present, the price signal confronting producers is flawed because it does not convey the full (social) cost of scarce resources; therefore the market encourages excessive production and pollution.
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The following graph is the production possibilities curve of a nation:
Refer to the above graph. The combination "5 drill presses and 2 bread" indicates:
A. An unattainable combination for the nation
B. Some resources in the nation are unemployed
C. An ideal combination for the nation
D. A combination produced when the nation is at full employment
Which of the following will most likely occur in the short run if long-run equilibrium is disturbed by an unanticipated decrease in aggregate demand?
What will be an ideal response?