The more price elastic the demand curve, the more a competitive market will over-produce (relative to the efficient level) in the presence of a negative externality.
Answer the following statement true (T) or false (F)
True
Rationale: The efficient quantity is where SMC crosses demand -- whereas the competitive quantity is where supply intersects demand. The shallower demand is, the greater the difference between these intersections on the quantity axis for any pair of supply and SMC curves.
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The above figure shows Bobby's indifference map for soda and juice. B1 indicates his original budget line. B2 indicates his budget line resulting from a decrease in the price of soda. What change in quantity best represents his substitution effect?
A) 3 B) 10 C) 15 D) 7
A country has a comparative advantage over another in the production of gadgets if it can produce
A. more gadgets than can the other country. B. more gadgets than can any other country. C. gadgets more efficiently than it can produce any other good. D. gadgets at lower opportunity cost than can the other country.
An inflationary output gap is defined to be when the current level of output is:
A. below full employment GDP. B. above full employment GDP. C. equivalent to full employment GDP. D. high enough to cause an unexpected amount of inflation.
Which of the following is not a common characteristic of oligopolistic firms?
a. high barriers to entry b. mutual interdependence c. a large number of sellers d. nonprice competition