In a perfectly competitive market, if P > MC, then
A) too little output is being produced.
B) too much output is being produced.
C) production is efficient, as the firm is earning profits.
D) the firm is paying a price for resources that is too high.
Answer: A
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If producing a good or a service creates pollution, then
A) an unregulated competitive market produces an efficient output. B) the industry's supply curve includes the extra cost of pollution. C) at the unregulated, competitive market equilibrium quantity, marginal social cost is greater than the equilibrium price. D) at the unregulated, competitive market equilibrium quantity, marginal social benefit and marginal social cost are equal. E) at the unregulated, competitive market equilibrium quantity, marginal social benefit is less than the equilibrium price.
A small open economy reduces its desired saving. This causes the world real interest rate to ________ and the country's current account balance to ________
A) fall; fall B) remain unchanged; rise C) fall; rise D) remain unchanged; fall
The possibility of speculative bubbles in the stock market arises in part because
a. stock prices may not depend at all on psychological factors. b. fundamental analysis may be the correct way to evaluate the value of stocks. c. future streams of dividend payments are very hard to estimate. d. the value of shares of stock depends not only on the future stream of dividend payments but also on the price at which the stock will be sold.
This graph shows the marginal cost and marginal benefit associated with roadside litter clean up. Assume that the marginal benefit curve and marginal cost curve each have their usual slope.
The marginal cost of litter removal ________ due to ________.
A. decreases; diminishing returns to inputs B. increases; increasing opportunity costs C. increases; the Coase Theorem D. decreases; gains from specialization