In general, an externality is created when
A) people are affected (other than by price) by a transaction which they were not part of.
B) firms produce a product of low quality and consumers don't like it.
C) firms have to pay for polluting the environment.
D) the government subsidizes education.
A
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The efficiency of monopolistic competition
A) is as clear-cut as the efficiency of perfect competition. B) depends on whether the gain from extra product variety offsets the selling costs and the extra cost that arises from excess capacity. C) comes from its excess capacity. D) is eliminated in the long run. E) is equal to that of monopoly.
Personal income taxes and transfer payments
A) acts as automatic stabilizers. B) magnify fluctuations in GDP. C) are discretionary fiscal policy tools only. D) are influenced by monetary policy.