Peter studies at the coffee shop around the corner, at the same time that John talks loudly on his cell phone. The costs and benefits of each cell phone call made by John are given by the following table: 
According to the Coase theorem, when the parties affected by externalities can negotiate costlessly with one another
A. an efficient outcome results no matter how the law assigns responsibility.
B. efficiency cannot be reached without government intervention.
C. the correct way to deal with an externality is to tax it.
D. an efficient outcome results if the liability is placed on the party with the lowest cost of prevention.
Answer: A
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Assume the inflation rate falls from 4 percent to 2 percent. This means that
A) the price level has fallen. B) the price level is increasing more slowly. C) the economy is experiencing deflation. D) real GDP is decreasing.
An increase in the demand for lobster due to changes in consumer tastes, accompanied by a decrease in the supply of lobster as a result bad weather reducing the number of fishermen trapping lobster, will result in
A) a decrease in the equilibrium quantity of lobster and no change in the equilibrium price. B) an increase in the equilibrium price of lobster and no change in the equilibrium quantity. C) a decrease in the equilibrium quantity of lobster; the equilibrium price may increase or decrease. D) an increase in the equilibrium price of lobster; the equilibrium quantity may increase or decrease.
Which of the following tools is used most often by the Fed for changing the supply of money?
A. Open market operations B. Reserve requirement C. Discount window D. Interest rate
Assume that a 4 percent increase in income results in a 2 percent increase in the quantity demanded of a good. The income elasticity of demand for the good is
a. negative, and the good is an inferior good. b. negative, and the good is a normal good. c. positive, and the good is a normal good. d. positive, and the good is an inferior good.