A paint firm has just announced that it will be building a new plant in a small town that is currently experiencing a high level of unemployment. The new plant will create 500 new jobs in the area and will occupy unused land at the edge of town.
The plant will also dump some harmful chemicals into the town's river. From an economic standpoint this dumping of chemicals A) is unimportant since the firm is reducing the unemployment in the region.
B) creates a negative externality.
C) is the production of a public good.
D) creates a positive externality.
Question 2
List prices on new cars do not change very often, so
A) the real price of cars is very inflexible.
B) the prices of new cars can only be flexible if there are changes in the cost of materials.
C) price flexibility is not an important feature in the auto market.
D) price flexibility shows up primarily through the negotiations between buyers and sellers.
