When a positive externality exists in a market, total surplus:
A. is the same as a market without a negative externality.
B. is decreased by deadweight loss compared to that same market without a negative externality.
C. is the same but re-distributed differently than if that same market did not have a negative externality.
D. is increased by deadweight gain compared to that same market without a negative externality.
Answer: B
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When the curve that envelops the series of possible short-run average total cost curves is horizontal, this means that there are:
a. economies of scale. b. diseconomies of scale. c. constant returns to scale. d. diminishing returns. e. some fixed factors of production.
According to real business cycle theory,
A. monetary factors affecting aggregate demand cause macroeconomic instability. B. when real wages fall during recessions, "real" unemployment rates rise. C. recessions result from declines in long-run aggregate supply, rather than decreases in aggregate demand. D. the net long-run costs of business fluctuations are severe.