For voluntary action to correct an externality
A. transaction costs are irrelevant.
B. transaction costs have to be low.
C. transaction costs have to be high.
D. transaction costs have to be split evenly between all of the parties involved.
Answer: B
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If the percentage change in quantity demanded divided by the percentage change in price equals 1, then
a. supply is inelastic b. supply is elastic c. demand is elastic d. demand is inelastic e. demand is unit elastic
A competitive market is in long-run equilibrium. If demand increases, we can be certain that price will
a. rise in the short run. Some firms will enter the industry. Price will then rise to reach the new long-run equilibrium. b. rise in the short run. Some firms will enter the industry. Price will then fall to reach the new long-run equilibrium. c. fall in the short run. All, some, or no firms will shut down, and some of them will exit the industry. Price will then rise to reach the new long-run equilibrium. d. not rise in the short run because firms will enter to maintain the price.
All of the following are characteristics of monopolistic competition EXCEPT
A. product differentiation. B. a few firms dominate the industry. C. many firms in the industry. D. advertising.
Opponents of tax reforms intended to raise saving argue that such reforms
a. favor those with high income, and that saving may not rise because of the substitution effect. b. favor those with high income, and that saving may not rise because of the income effect. c. favor those with low income, and that saving may not rise because of the substitution effect. d. favor those with low income, and that saving may not rise because of the income effect.