In an informed and voluntary exchange,
a. both parties receive something they value more than what they gave up.
b. both parties place an equal value on what they received and what they gave up.
c. neither party can gain more than the other.
d. one trader can gain only at the expense of the other.
A
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In the 1960s, the lyrics of a rock song asked, “Did you ever have to make up your mind to say yes to one and leave the others behind?” What economic principle was demonstrated in the song? Explain.
What will be an ideal response?
Which of the following is NOT true according to Say's law?
A) Producing goods and services generates the means and the willingness to purchase other goods and services. B) Desired expenditures will always be higher than actual expenditures. C) Supply creates its own demand. D) No overproduction is possible in a market economy in the long run.
Refer to Figure 17-1. Suppose that the economy is currently at point A, and the unemployment rate at A is the natural rate. What policy would the Federal Reserve pursue if it wanted the economy to move to point B in the long run?
A) Sell treasury bills. B) Raise the discount rate. C) Decrease the money supply. D) Buy treasury bills. E) No policy will move the economy to point B in the long run.
In the short run, when the prevailing market price falls below the average variable cost curve, a firm in perfect competition will shut down because: a. economic profit is zero
b. price is less than marginal revenue. c. marginal revenue is insufficient to pay average variable cost. d. other firms will enter the market seeking profits.