The tragedy of the commons can be solved by:
a. turning the good into a public good
b. government regulation or taxation to prevent overconsumption
c. both of the above
d. neither of the above
Answer: b. government regulation or taxation to prevent overconsumption
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If prices are sticky
A) prices will quickly adjust to changes in demand. B) economic activity will not be coordinated efficiently. C) quantity supplied will always equal quantity demand. D) economic activity will be coordinated efficiently.
The market for control of corporations serves to
A) create moral hazard. B) address the principal-agent problem. C) add to economies of scale. D) address the problem of adverse selection.
What condition must be met in order for total spending to equal total output?
a. The sum of saving and government purchases must equal the sum of planned investment and net taxes. b. The sum of saving and net taxes must equal the sum of planned investment and government purchases. c. The sum of saving and planned investment must equal the sum of government purchases and net taxes. d. Saving must equal net taxes. e. The sum of saving and net taxes must equal planned investment minus government purchases.
A perfectly competitive firm produces 3,000 units of a good at a total cost of $36,000. The fixed cost of production is $20,000. The price of each good is $10. Should the firm continue to produce in the short run?
A) No, it should shut down because it is making a loss. B) Yes, it should continue to produce because its price exceeds its average fixed cost. C) Yes, it should continue to produce because the firm's revenues cover the total variable cost of $16,000. D) There is insufficient information to answer the question.