“Technological’ externalities”

Instructions: You are to consider each of the following statements. Determine whether each statement is absolutely True, absolutely False or Uncertain (i.e., ‘it depends’). Then carefully explain why your determination is correct, making sure to define the key terms and relationships you use in your explanation using graphical analysis where appropriate. (2 marks for the determination; 8 marks for the explanation).
1. The clearing of streets and roads of snow is a public good/service.
2. A Gini coefficient whose value is closer to zero indicates a more unequal distribution of income.
3. The income effect of a wage decrease will induce the household to decrease its amount of leisure foregone.
4. When ‘technological’ externalities are present in the production of commodity x, resources will be over-allocated to the production of that commodity in a perfectly competitive market.
5. The demand for labour is a ‘derived’ demand.