The diamond-water paradox was solved by knowing that
A. the price of water and diamonds is determined by total utility received, not marginal utility.
B. the price of water and diamonds is determined by marginal utility, not total utility.
C. the total utility of water is greater than the total utility of diamonds.
D. the marginal utility of water is greater than the marginal utility of diamonds.
Answer: B
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With respect to international trade, specialization means that
A. each country consumes what it produces. B. labor is exported or imported in much the same way as other products. C. most goods and services that are traded internationally are produced in only 1 or 2 nations. D. labor and other resources in a nation are used to produce the products and services for which they are best suited.
The "shoe-leather costs" of inflation are the costs from
A) the government taking a higher percentage of interest income. B) higher prices for all goods, including necessities such as shoes. C) confusion as people lose track of real costs and benefits. D) higher taxes due to higher inflation. E) time spent trying to spend money quickly.
Discuss the difference between first-best and second-best price regulation. In your answer, you should address why governments regulate markets and the difficulties faced when doing so.
What will be an ideal response?
Which of the following is NOT a reason that people tend to deposit their funds with banks rather than lend their funds directly to other individuals?
A) asymmetric information problems B) adverse selection problems C) moral hazard problems D) liquidity problems