When there is an externality in a market
A) the externality will move the market to an economically efficient equilibrium.
B) the externality will cause the market price to be less than or greater than the equilibrium price.
C) the government should use price controls to enable the market to reach equilibrium.
D) government intervention may increase economic efficiency.
Answer: D
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Refer to the above figure. If the government uses rate-of-return regulation for the natural monopolist, the firm will charge price
A) P5 and sell Q1 units. B) P2 and sell Q1 units. C) P3 and sell Q3 units. D) P1 and sell Q4 units.
The impact of the multiplier effect is to:
a. smooth out the up and down swings of the business cycle. b. promote price stability. c. magnify small changes in spending into much larger changes in real GDP. d. reduce the impact of an increase in investment on output and employment.