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In economics, Externality means:

A. An externality is a cost or benefit which is not transmitted through prices

B. An externality is a cost or benefit which is transmitted through prices

C. An externality is a production received through external resources

D. None of the above

Correct Answer :

A. An externality is a cost or benefit which is not transmitted through prices


In economics, an externality (or transaction spillover) is a cost or benefit, not transmitted through prices, incurred by a party who did not agree to the action causing the cost or benefit. A benefit in this case is called a positive externality or external benefit, while a cost is called a negative externality or external cost. Negative A negative externality is an action of a product on consumers that imposes a negative side effect on a third party; it is social cost. Many negative externalities (also called external costs or external diseconomies) are related to the environmental consequences of production and use.
Examples of negative externalities are:
(i) Air pollution from burning fossil fuels causes damages to crops, (historic) buildings and public health.
(ii) Water pollution by industries that adds poisons to the water, which harm plants, animals, and humans.
(iii)The consumption of alcohol when it leads to traffic or other accidents that injure or kill others. Positive
Examples of positive externalities (beneficial externality, external benefit, external economy, or Merit goods) include:
(i)A beekeeper keeps the bees for their honey. A side effect or externality associated with his activity is the pollination of surrounding crops by the bees. The value generated by the pollination may be more important than the value of the harvested honey.
(ii)An individual planting an attractive garden in front of his or her house may provide benefits to others living in the area, and even financial benefits in the form of increased property values for all property owners.
(iii)A public organization that coordinates the control of an infectious disease preventing others in society from getting sick.}

Related Questions

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A demand curve is not related to:

A. The price of the commodity

B. The time period

C. The price of substitutes

D. Any of the above

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4

In a socialist (communist) economy the invisible hand:

A. Guides most resource allocation decisions

B. Operates effectively only in the labor market

C. Operates effectively only in the market for capital

D. Is prevented from operating effectively

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4

Who is the author of Choice of Technique?

A. K.N.Raj

B. Amartiya Sen

C. A.C.Pigou

D. Alfred Marshal

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The longer the period of time, the elasticity of supply will be:

A. Constant

B. Less elastic

C. More elastic

D. Perfectly elastic

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An economic model describing the working of an economy consists of:

A. Functional relationships

B. Family relationships

C. Economic position

D. Stagnant relationships

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We can find total utility by:

A. Multiplying the number of unit by its marginal utility

B. Adding up the marginal utility of all units

C. Multiplying price by number of units

D. None of the above

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Market demand curve is:

A. Vertical summation of individual demand curves

B. Upward summation of individual demand curves

C. Downward summation of individual demand curves

D. Horizontal summation of individual demand curves

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7.The costs which the firms have to face in order to change the price tags of their products and services are called:

A. Product costs

B. Real costs

C. Menu costs

D. Nominal costs

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The budget line is described by each of the following except:

A. Prices of products are assumed to be fixed

B. The consumer need not to spend all his income

C. Consumer income is assumed to be fixed

D. The slope represents relative prices

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4

If the price of product A decreases and in the result the demand for product B increases then we can say that:

A. A and B are substitute goods

B. A and B are complementary goods

C. A is an inferior good

D. B is an inferior good

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When a consumer is in equilibrium then slope of indifference curve is:

A. Equal to the slope of budget line

B. Greater than the slope of budget line

C. Smaller than the slope of budget line

D. Parallel to the slope of budget line

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The average fixed cost (AFC) curve is asymptote to:

A. X-axis

B. Y-axis

C. Z-axis

D. None of the above

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Micro economics is concerned with:

A. Product markets

B. Factor markets

C. Supply and demand

D. a, b and c

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The supply curve for the short-run competitive firm is the same as:

A. Marginal cost curve

B. Average variable cost curve

C. That part of the marginal cost curve which equals or is greater than AVC

D. Average total cost curve

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Income-demand curve shows:

A. Income-expenditure relationship

B. Income-cost relationship

C. Income-price relationship

D. Income-quantity relationship

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Discriminating monopoly implies that the monopolist charges different prices for his commodity:

A. From different groups of consumers

B. For different uses

C. At different places

D. Any of the above

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If the commodity is normal then the Income Effect (I.E) and the Substitution Effect (S.E):

A. Both move together and reinforce each other

B. One moves and the other remains constant

C. Move in the opposite direction and neutralize each other

D. Both remain constant

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If two goods have same marginal utility for a consumer then:

A. He will consume only one of them

B. He will consume equal quantities of them

C. He will be willing to pay the same price for each of them

D. The total utility gained from each of them is equal

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The basic subject matter of economics is:

A. Money

B. Capital resources

C. Scarcity

D. Inflation

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A monopolist is able to maximize his profit when:

A. His output is maximum

B. He charges a high price

C. His average cost is minimum

D. His marginal revenue is equal to marginal cost

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If a consumer buys a product that costs Rs.3 and provides an additional 18 units of satisfaction, then for this purchase:

A. Total utility will increase by 6 units

B. The marginal utility per rupee is 6

C. The consumer will buy more because marginal utility is positive

D. The consumer obtained an extra54 units

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Neutral Technological Progress can be defined as:

A. Technological progress that causes to raise the marginal product of capital and labor in the same proportion

B. Technological progress that causes the marginal product of capital to increase relative to the marginal product of labor

C. Technological progress that causes the marginal product of labor to increase relative to the marginal product of capital

D. None of the above

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Quantity demanded or supplied is measured in:

A. Monetary units

B. Physical units

C. Relative units

D. Constant units

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The difference between average total cost and average fixed cost shows:

A. Normal profits

B. Implicit costs

C. Variable costs

D. Opportunity costs

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If the production function is homogeneous, the expansion path will be a straight line through the origin whose slope determines the optimal:

A. L/K ratio

B. K/L ratio

C. P/L ratio

D. P/K ratio

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The concept of product differentiation was firstly introduced by:

A. Smith

B. Kaldor

C. Sraffa

D. Marshal

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Perfect competition assumes:

A. All buyers and sellers have perfect knowledge of the market

B. Freedom of entry of firms into the industry

C. Homogeneous product

D. All of the above

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The firms in non-cooperative games:

A. Enforce contracts

B. Make contracts

C. Make negotiations

D. Do not make negotiations

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The demand for cigarettes is price inelastic implying a unit tax on this commodity will

A. Will mainly paid by sellers of the product

B. By mainly paid by cigarette smokers

C. Be mainly paid by tobacco growers

D. None of the above

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The difference between the average total cost and average variable cost as output increases will:

A. Increases

B. Remains the same

C. Diminishes

D. Zero