If the production of a good gives rise to negative externalities, ________
A) the fixed cost of production is zero
B) the variable cost of production is zero
C) the private cost of production exceeds the social cost of production
D) the social cost of production exceeds the private cost of production
D
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Inmates at the federal penitentiary at Lompoc, California, accepted packages of mackerel in exchange for goods and services. Why were they willing to accept mackerel in exchange for goods and services?
A) because mackerel is a good source of protein B) because prison authorities deemed mackerel legal tender C) because the inmates know that they could use the packages of mackerel to buy other goods and services D) because the inmates do not wish to consume mackerel
The default risk premium fluctuates mainly
A) because bond rating agencies tend to be inconsistent in their ratings of bonds. B) because risk-neutral investors will often become risk-averse as time passes. C) because taxes tend to rise over the long run. D) as new information about a borrower's creditworthiness becomes available.