Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. The men are given food when they walk in and the women are given drink. Suppose they have identical preferences where food and drink provide utility U = F?D? . The contract curve in the Edgeworth box using a representative man and woman would be
a. a right angle connecting the lower left corner with the upper right corner.
b. a curve (not necessarily a line) connecting the lower left corner with the upper right corner.
c. a line connecting the lower left corner with the upper right corner.
d. a right angle connecting the upper left corner with the lower right corner.
b
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Which of the following is not a solution to the problem of negative externalities due to pollution?
a. Create private property rights. b. Levy pollution taxes. c. Create obligatory controls. d. Reward the production of these products through subsidies. e. Establish strict limits on the amount of pollution allowed.
The term price searcher applies to all firms that
a. face a downward-sloping demand curve. b. face an upward-sloping demand curve. c. operate in a purely competitive environment. d. purchase resources in a noncompetitive market.
The time value of the option can best be defined as
A. the fee earned for the potential benefits from buying the option. B. the commission earned by a broker. C. the service fee charged by the SEC for regulating the option market. D. the fee paid for the potential benefits from buying an option (excluding its intrinsic value).
A period of significant decline in economic activity, marked by falling GDP, rising unemployment, and an increased number of bankruptcies, is called:
A. a boom. B. a recession. C. an expansion. D. a severe depression.