The price system allocates resources efficiently EXCEPT when
A. the production of a good affects parties other than its buyers and sellers.
B. consumers decide they want more of a good.
C. resources are utilized to produce the highest-valued goods and services.
D. voluntary exchange exists.
Answer: A
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When an economy's simple spending multiplier is 2.5, then its marginal propensity to consume is 0.4
a. True b. False Indicate whether the statement is true or false
When an economy sacrifices production of consumption goods to produce more capital goods, we would expect that the production possibilities curve will
A. shift about in random fashion. B. become a straight line. C. shift outward. D. shift inward.
What is one implication of the real-balance effect?
A. Aggregate demand and aggregate supply can never reach long-run equilibrium. B. When the price level falls, most consumers reallocate their spending so as to have an equal balance between necessities and luxuries. C. The part of your wealth that you hold in the form of cash loses some of its value as the price level rises. D. When the price level rises, people have an incentive to work harder in order to earn a higher income.
Assume that the market for bread is perfectly competitive. The demand for bread is given by the equation: D = 120 - 10P and the market supply for bread is given by: S = 60 + 5P. Determine the equilibrium price and quantity of bread
What happens if the price of the bread is set at $10 per loaf? What happens if the market price is set at $2 per loaf?