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Author Question: What are pecuniary externalities? Explain with the help of an example. What will be an ideal ... (Read 68 times)

JMatthes

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on: Jun 29, 2018
What are pecuniary externalities? Explain with the help of an example.
 
  What will be an ideal response?

Question 2

Which of the following is likely to be observed among unemployed individuals if the government offers generous unemployment benefits?
 
  A) Higher motivation to look for a job
  B) Increased acceptance of low-paying jobs
  C) Lower current consumption
  D) Reduced motivation to look for a job


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mcabuhat

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Reply #1 on: Jun 29, 2018
Answer to Question 1

A pecuniary externality occurs when a market transaction affects others through market prices. For example, if a large number of consumers decide to purchase a car, the price of the car will increase due to an increase in demand. This creates a pecuniary externality for other potential buyers of the car in the form of higher prices.

Answer to Question 2

D


JMatthes

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Reply 2 on: Jun 29, 2018
YES! Correct, THANKS for helping me on my review

Sarahjh

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Reply 3 on: Yesterday
Gracias!

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