When positive externalities exist in a market, if a Pigouvian subsidy is imposed:
A. those who interact in the market will gain surplus.
B. those who do not interact in the market, but are affected by the externality, will gain surplus.
C. those who interact in the market will lose surplus.
D. None of these statements is necessarily true.
Answer: A
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This Application refers to quantitative easing, a policy that occurs when the Fed
A) changes the reserve requirement. B) purchases long-term securities. C) raises the discount rate. D) sells mortgage-backed securities.
Income elasticity relates to
A) a movement down a demand curve. B) a movement up a demand curve. C) a horizontal shift in a demand curve. D) the percentage change in quantity demanded divided by the percentage change in the price.
One barrier to entry into a monopoly market is:
A. a natural monopoly. B. commonplace inputs. C. bulk buying. D. price gouging.
The short-run Phillips curve shows that as the unemployment rate goes down, _____
a. unemployment benefit payments go up b. prices go down c. the Phillips curve shifts outward d. the inflation rate goes up e. there is no change in the rate of inflation