Which of the following would eliminate scarcity as an economic problem?
a. Moderation of people's competitive instincts.
b. Discovery of sufficiently large new energy reserves.
c. Resumption of steady productivity growth.
d. None of these.
d
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Your drink budget is entirely split between bottled water and fancy liqueurs, and your tastes are quasilinear in bottled water. In an attempt to get people to drink more water, the government introduces a subsidy that lowers the price of bottled water.
a. In a graph with bottled water on the horizontal and fancy liqueurs on the vertical axis, illustrate your before-subsidy budget and your optimal bundle A. b. As a result of the water subsidy, I notice you consume more fancy liqueur. Illustrate this in your graph using income and substitution effects. c. You and I are good friends, in part because I confided in you some time ago that I, too, have tastes that are quasilinear in water. (Nothing bonds like quasilinearity!) But, after the subsidy is introduced, you observe that I, unlike you, have reduced my consumption of fancy liqueurs. Your other friends claim that this is proof that our friendship is based on a fiction --- that I cannot possibly also have quasilinear tastes. Illustrate in a graph why your friends are wrong. d. If we both have quasilinear tastes, can you explain what the fundamental difference in our tastes is that accounts for the difference in behavior? What will be an ideal response?
Monopolies can make an economic profit in the long run because there
A) are close substitutes for the product. B) is free entry and exit. C) is inelastic demand from consumers. D) is a barrier to entry.
Congo, Dem. Rep. and Burundil have per capita GDPs of less than $______.
Fill in the blank(s) with the appropriate word(s).
During the late 1990s, Japan experienced reductions in the GDP deflator. Given this information, we know with certainty that
A) real GDP fell during these periods. B) real GDP did not change during these periods. C) the overall price level in Japan decreased during these periods. D) both real GDP and the overall price level decreased during these periods.