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7. The cross-price elasticity of demand between Product A and Product B is -1.5. If the price of Product B increases by 10%, what will happen to the demand for Product A and the nature of their relationship? (A) Demand for A increases by \( 15\% \); they are substitutes. (B) Demand for A decreases by \( 15\% \); they are complements. (C) Demand for A decreases by \( 1.5\% \); they are complements. (D) Demand for A increases by \( 15\% \); they are normal goods.

8. According to the Coase Theorem, private parties can solve the problem of externalities without government intervention if: (A) Transaction costs are low and property rights are clearly defined. (B) The government imposes a Pigovian tax equal to the marginal external cost. (C) The polluter is legally required to pay for all damages regardless of cost. (D) The number of affected parties is large enough to ensure a fair outcome.

9. If the provision of national defense were left entirely to the private market, it would be under-provided primarily because: (A) The marginal cost of providing defense to an additional citizen is extremely high, making it unprofitable for private firms. (B) The marginal social benefit of defense is the horizontal sum of all individual demand curves, which private firms cannot calculate. (C) The government possesses an absolute advantage in military technology, creating an insurmountable barrier to entry for private firms. (D) Individual willingness to pay cannot be captured by a market price, as consumers have no incentive to reveal their true valuation of the good.