If a firm’s production creates detrimental externalities, then in a competitive market,
A. the firm will produce at an inefficiently high level.
B. the firm will produce at an inefficiently low level.
C. the firm will produce until marginal social cost equals marginal benefits.
D. the firm will produce until marginal benefits exceed marginal social cost.
Answer: A
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P-TV and QRS-TV are trying to decide whether to air a sitcom or a reality show in a given time slot. Viewers like both sitcoms and reality shows, but sitcoms are more expensive to produce than reality shows since real actors need to be hired. QRS-TV makes its decision first, and then P-TV observes that choice before making its decision. Both stations know all of the information in the decision tree below. 
Given the information in this decision tree, if QRS-TV announces that it will air a reality show, it can expect to:
A. earn $10 million. B. lose $5 million. C. earn $20 million. D. earn $5 million.
The protection of rights is an all-or-nothing proposition
a. True b. False
A situation in which output decreases while prices increase is often referred to as:
A. inflation. B. negative economic growth. C. a recession. D. stagflation.
When the Fed buys U.S. government securities, the money supply
A. increases because there is an increase in transaction deposits at the bank of the bond dealer but there is no decrease in transaction deposits at any other bank. B. remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a reduction in transaction deposits at the Fed. C. decreases because there is an increase in the reserves of the bond dealer's bank. D. remains unchanged because the increase in transaction deposits at the bond dealer's bank is offset by a fall in transaction deposits at another bank.