1. A competitive, unregulated market would
A. Produce too much pollution because pollution is an external cost.
B. Produce too little education because education has an external benefit.
C. Fail to achieve equilibrium if there are externalities present.
D. Both answers A and B are correct.
E. Both answers B and C are correct.
2. Utility is the
A. Benefit or satisfaction that a person gets from the consumption of a good or service.
B. Measure of how useful a resource is in the production process.
C. Measure of productivity associated with a good or service.
D. Economic term for consumption possibilities.
E. Economic term for how changes in price affect a consumer's purchases.
3. Externalities
A. Can be either benefits or costs.
B. Always create extra social costs.
C. Always make society better off.
D. Cannot be expressed in dollar amounts.