Explain the main arguments in favor of economic stabilization
Fluctuations in the economy-recessions and booms-are costly. Recessions in particular are a waste of resources, since people and machines are idle when they could be producing goods and services. Stabilization policies can help to eliminate this waste of resources.
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Based on the figure below. Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating _____gap. 
A. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary
Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes an average cost pricing rule, the firm provides service to
A) 3.5 million households. B) 6 million households. C) 10.5 million households. D) 12.5 million households.
The effect of unions tends to ____ output in the union sector and ____ output in the non-union sector
a. increase; increase. b. increase; decrease. c. decrease; increase. d. decrease; decrease.
An example of a market subject to adverse selection would be:
A. the video game market. B. uniform commodity markets like crude oil. C. the used car market. D. the new appliance market.