Unformatted text preview: low in the presence of external benefits. 9. B) The current amount of sailing is too high because it does not account for the external costs. Raising the price of sailing will move the market toward the equilibrium. 10. B) Wayne would be traded to the team which valued him the most. 11. D) Wayne would prefer an auction because he would reap the benefit of his value, rather than the team which drafts him. 12. E) Ti ‐ Vo cuts down on the value of TV commercial time (because people don’t watch them as much) so TV networks will be less profitable and there will be less investment in TV shows. 13. E) Government intervention can improve market outcomes if there are externalities. Subsidies may not produce benefits for everyone in a market with externalities....
View Full Document
- Fall '06
- Economics, Market failure, Externality, efficient outcome