Monopolists are criticized because they are inefficient. What is meant by this statement?
A. Monopolists could use their resources better elsewhere.
B. Monopolists don't innovate enough to control pollution.
C. Monopolists produce a large quantity of waste.
D. Monopolists usually don't produce at the minimum of the ATC.
Answer: D
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The total value to society of having garbage removed is greater than the value of baseball games. Why, then, are baseball players paid more than garbage collectors?
A) Garbage removal results in significant external benefits that are not captured in the price paid for garbage removal. As a result, wages of garbage collectors do not reflect their social benefits. B) There is greater competition in the garbage collection industry than there is in Major League Baseball. C) Wages do not depend on total values but marginal values. The marginal revenue product of baseball players exceeds the marginal revenue product of garbage collectors. D) Although the total value of garbage removal is greater than the total value of baseball, wages are determined by average values.
In behavioral economics, the endowment effect refers to the fact that
A) most people believe that most wealthy people inherit their wealth. B) many people would be indifferent between being endowed with money or knowledge. C) many people place a higher value on what they own than the same item they are considering purchasing. D) most people respond to tax incentives to provide an endowment for their children.
Which of the following is not true of a recession?
a. The economy is overheated. b. Cyclical unemployment is high. c. Unemployment is caused by insufficient spending. d. If the economy is in equilibrium, the aggregate expenditure line is too low to create an intersection at the full-employment level. e. If employers hired more workers to reduce unemployment, they would be unable to sell all the extra output those workers would produce.
A government may decide that by running large budget deficits it can make crucial long-term investments in human capital and physical infrastructure that will build the long-term __________________ of a country.
a. effectiveness b. profitability c. employment d. productivity