Which of the following statements about markets and prices is correct?
A. In a market system, buyers and sellers must be in face-to-face contact with each other
B. Prices affect the distribution of goods in a market system but not the allocation of resources
C. In a market system, prices serve to ration goods and services to consumers
D. The operation of a market system has little, if any, effect on the distribution of income in the economy
Answer: C
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Hotelling's model has been used to describe differentiation in the political "market." Suppose that 100 voters are evenly distributed between the extreme left and the extreme right on the political spectrum, and that all voters vote, and they always vote for the candidate closest to them on this spectrum. The numbers on this spectrum represent the number of voters lying to the left of the number. So, at the midpoint, fifty voters lie to the left and fifty to the right. At the extreme right end, all 100 voters lie to the left. 
width="553" />If Candidate Y is running against Candidate Z: A. Both candidates will have an incentive to move to the left. B. Both candidates will have an incentive to move toward each other's position. C. Candidate Y will have an incentive to move to the left, and Candidate Z will have an incentive to move to the right. D. Neither candidate has any incentive to move.
The interest rate in Canada rises while the interest rate in the United States does not change. The
A) demand curve for Canadian dollars will shift leftward. B) demand curve for Canadian dollars will shift rightward. C) demand curve for U.S. dollars will shift rightward. D) demand curves for both Canadian and U.S. dollars will remain unchanged.
A higher saving rate leads to faster growth because
A) more saving produces greater additions to capital per hour of labor, raising real GDP per person. B) capital would wear out faster. C) people could consume more of an economy's output. D) population growth would accelerate.
The firm depicted in Figure 8.1 is:
A) earning a positive economic profit. B) incurring an economic loss and should shut down. C) incurring an economic loss but it should continue to operate in the short run so long as price exceeds average variable costs. D) earning a zero economic profit.