A consumer values a house at $525,000 and a producer values the same house at $485,000 . If the transaction is completed at $510,000 . the transaction will generate:
a. No surplus
b. $25,000 worth of seller surplus and unknown amount of buyer surplus
c. $15,000 worth of buyer surplus and $25,000 of seller surplus
d. $25,000 worth of buyer surplus and unknown amount of seller surplus
c
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The fact that most people make some decisions based on intuition rather than calculation is:
A. inconsistent with the cost-benefit model, but still rational. B. consistent with the cost-benefit model because most people intuitively weigh costs and benefits. C. consistent with the cost-benefit model because calculating costs and benefits is irrational. D. irrational, because intuition is usually wrong.
If the Fed wants to lower the money supply
A) it should lower the discount rate. B) it should buy bonds. C) it should lower the reserve requirement. D) it should sell bonds.
When the Central Bank acts in a way that causes the money supply to increase while aggregate demand remains unchanged, it is:
a. following a contractionary monetary policy. b. following quantitative easing policy. c. following a tight monetary policy. d. following an expansionary monetary policy.
Explain the concept of 'creative destruction' by innovation. Does it ensure positive economic profits in the long run?