Author Question: Externalities can lead to inefficient economic outcomes because: A) firms do not have to pay the ... (Read 77 times)

formula1 · **on:** Jul 1, 2018

Externalities can lead to inefficient economic outcomes because:

A) firms do not have to pay the full cost associated with using inputs that cause pollution.
B) firms that produce public goods tend to be monopolies.
C) Both A and B are correct.
D) none of the above

Question 2

Suppose the federal government allows labor unions to act as the sole seller in labor markets, but the government collects an annual 10,000,000 administrative fee from each union in this situation.

Assuming this fee is not so large that it forces the unions to disband, what is the impact of this fee on the equilibrium wage and employment level in the monopolized labor market? A) Wages and employment decline.
B) Wages increase and employment declines.
C) Employment increases and wages decline.
D) No change in wages or employment levels.