Suppose that the ABC industry produces a good that results in significant spillover costs to society. Such production suggests that:
A. at the market price, quantity demanded is less than quantity supplied.
B. the firms in this industry are not maximizing profits.
C. resources are overallocated to the industry.
D. resources are underallocated to the industry.
Answer: C
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The assumption that the two goods are made using different factor intensities raises the likelihood of incomplete specialization after trade begins
Indicate whether the statement is true or false
Which of the following observations was made famous by Adam Smith in his book The Wealth of Nations?
a. There is no such thing as a free lunch. b. People buy more when prices are low than when prices are high. c. No matter how much people earn, they tend to spend more than they earn. d. Households and firms interacting in markets are guided by an "invisible hand" that leads them to desirable market outcomes.
"Crowding in" refers to federal government deficits:
A. used for public infrastructure that will offset any decline in business investment. B. which reduce private business and consumption spending. C. which reduce future rates of economic growth. D. when the economy is at full employment.
The demand curve for an individual seller's product in perfect competition is
A) the same as market demand. B) downward sloping. C) vertical. D) horizontal.