Author Question: Externalities A) are not reflected in market prices, so they can be a source of economic ... (Read 31 times)

madam-professor · **on:** Jul 1, 2018

Externalities

A) are not reflected in market prices, so they can be a source of economic inefficiency.
B) do become reflected in market prices, so they can be a source of economic inefficiency.
C) are not reflected in market prices, so they do not adversely affect economic efficiency.
D) do become reflected in market prices, so they do not adversely affect economic efficiency.
E) may or may not become reflected in market prices, but do not have an impact on economic efficiency in either event.

Question 2

Refer to Figure 14.1. The income effect of the wage increase on the amount of hours of leisure is:

A) L0 to L2.
B) L0 to L1.
C) L1 to L2.
D) L2 to L1.
E) none of the above