Explain the difference between substitutes and complements
What will be an ideal response?
Substitutes are goods and services that can be used for the same purpose. Complements are goods and services that are used together.
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Using international asset trade, countries can
A) never really eliminate all risk. B) eliminate all risk. C) actually increase their risk in some cases. D) eliminate all their risk except for emerging markets. E) never really diversify their holdings.
A market is in equilibrium when
A) supply is equal to demand. B) the price is adjusting upward. C) the quantity supplied is equal to the quantity demanded. D) tastes and preference remain constant.
In 2006, hurricanes damaged many parts of Texas, destroying homes, businesses, schools, and infrastructure. In strictly economic terminology, these hurricanes are said to have caused
A) scarcity, because the damages made food and shelter scarce. B) scarcity, because some goods were difficult to get. C) shortages, because supplies were cut off and goods were destroyed. D) tradeoffs, because some areas of the country were damaged when others were not.
One difficulty in using voluntary transactions to internalize externalities is that
A) people are motivated by self-interest and are often unwilling to engage in a transaction that might make another person better off. B) the government usually will not enforce contracts of this type. C) transaction costs of coming to an agreement can be very large when numerous people are involved. D) people usually don't understand what the real opportunity costs are that they face.