Traditional models see no role for the government in pushing individuals toward the preferred equilibrium.
Answer the following statement true (T) or false (F)
False
Although traditional economists see free markets as guarantors of both liberty and prosperity, they recognize that if there are externalities, free markets will not necessarily lead to the best results. Externalities occur when people do not include the effect of their decisions on others in their decision-making process.
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Which of the following is the best example of a voluntary export restraint?
A) a $5,000 per-car fee imposed on all sports utility vehicles imported into the United States B) a subsidy granted by the U.S. government to domestic sports utility vehicle manufacturers so they can compete more effectively with foreign sports utility vehicle manufacturers C) a tax placed on all sports utility vehicles sold in the domestic market D) a limit set by the Japanese government on the number of sports utility vehicles that the United States can import from Japan
The authors note that the goal of maximizing the market value of the firm may be more appropriate than maximizing short-run profits because:
A) the market value of the firm is based on long-run profits. B) managers will not focus on increasing short-run profits at the expense of long-run profits. C) this would more closely align the interests of owners and managers. D) all of the above
Keynes believed that if the government increased spending and reduced taxes during an economic slump, then it would ________.
A. only further damage the economy. B. have no impact on the economy. C. hurt future generations. D. help the economy recover more quickly.
Which of the following led a strong attack against mainstream macroeconomists during the 1970s?
A) Friedman and Phelps B) Hicks and Hansen C) Modigliani and Friedman D) Lucas, Barro, and Sargent