If the difference between the marginal benefit and the marginal cost of a good is as large as possible,
A) resources are being used with maximum efficiency.
B) resources would create more value producing other goods and hence the production of this good should be decreased.
C) more of the good should be produced.
D) allocative efficiency has been attained.
E) Both answers A and D are correct.
C
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Suppose the quantity demanded of cigarette cartons falls by 5% when prices are increased by 100%. The price elasticity of demand for cigarettes is
A) elastic and equal to 0.05. B) inelastic and equal to 0.05. C) elastic and equal to 20. D) inelastic and equal to 20.
We expect the price elasticity of supply to be
A) negative. B) positive. C) between -1 and +1. D) zero.
If a citizen decides he has had enough of big government and launches a personal campaign to expose big spenders in Congress,
a. he is likely to have his taxes reduced dramatically b. his taxes are not likely to fall very much c. he will be thrown in jail d. he is likely to get elected by other voters e. he will get the support of many special-interest groups
If there is employment discrimination against minorities, this will cause the:
a. supply of their services to increase, and their wages to fall. b. demand for their services to decline, and their wages to fall. c. supply of their services to decline, and their wages to rise. d. demand for their services to decline, and their wages to rise.