Suppose the firms in the chemical industry are allowed, free of charge, to dump harmful products into rivers. How will the price and output of the chemical products in a competitive market compare with their values under conditions of ideal economic efficiency?
a. The price would be too low, and the output would be too large.
b. The price would be too high, and the output would be too large.
c. The price would be too low, and the output would be too small.
d. The price would be too high, and the output would be too small.
A
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What will be an ideal response?
Consumers know that some fraction, p, of all new cars produced and sold in the market are defective. The defective ones cannot be identified except by those who own them. Cars do not depreciate with use. Consumers are risk-neutral and value nondefective cars at $8,000. If new cars sell for $6,000 and used cars sell for $2,000, then what is the fraction p?
A. 0.33 B. 0.5 C. 0.25 D. 0.67
If price falls from $100 to $99 and quantity demanded rises from 2 to 3, the price elasticity of demand is
A. 0.03. B. 1.75. C. 25.7. D. 39.8.
We don't typically see wages ________ in response to an economic upswing because ________.
A. rise; they are "sticky," and are slow to respond to shifts in the economy B. rise; they cannot rise above the equilibrium in any circumstance C. fall; they cannot fall below where they were previously set due to inflation D. fall; they are "sticky," and are slow to respond to shifts in the economy