12. A.Spillover costs shift the burden of cost from the firm to society. This is also an example of a negative
externality.
13. B.Closing the widening gap between the poor and the upper class would increase efficiency in the economy.
More people would have jobs, thereby increasing productivity.
14. A.Increasing taxes is one way to reduce the levels of negative externalities because it increases the cost of
production for firms.
15. B.A decrease in taxes increases the level of disposable income. This increase in disposable income elevates
people from the poverty threshold.Part III: Microeconomics