There is no cost of using your own savings in your business.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 2When the benefits of an activity are received by those who are not directly involved in it, _____.
a. a negative externality exists
b. the government is producing a free good
c. resources are being used in their highest-valued activity
d. the government has to compensate for the loss in social welfare
e. a positive externality exists
QUESTION 3When there is a choice between the consumption of bundle X and bundle Y, the opportunity cost of consuming bundle X is bundle Y.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4Why do externalities arise?
a. The costs of production are not borne by the producer.
b. An economic activity imposes a burden on those who are not directly involved in it.
c. The consumption of a public good is nonexcludable.
d. The government produces goods and services which are consumed by only a particular group of people.
e. Goods of mass consumption are not produced as they do not yield profit for the producers.
QUESTION 5According to economists, human activity is unresponsive to changes in costs.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 6When a private transaction imposes costs on others not directly involved in the transaction, _____.
a. a negative externality exists
b. a positive externality exists
c. the good involved in the transaction is a club good
d. the tragedy of commons problem arises
e. a free rider problem arises
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