Answer the following statements true (T) or false (F)
1. When there is allocative efficiency in a market, the buyers' maximum willingness to pay for the last unit traded is equal to the sellers' minimum acceptable price for that unit.
2. When the total consumer and producer surplus is at a maximum, the deadweight loss in the market is zero.
3. Excludability means that when someone is consuming a good, then others are excluded from using the good anymore.
4. Nonrivalry in the use or consumption of a good means that only one person is consuming the good without any rivals.
1. TRUE
2. TRUE
3. FALSE
4. FALSE
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Suppose the corn-producing industry of the U.S. is a price taker in the world market and government puts a ban on imports. The corn industry also receives subsidy from the home government. Then
A) social welfare will increase if the ban on imports is removed. B) everyone will be better off if both ban on imports and subsidy are removed. C) social efficiency will be improved if both ban on imports and subsidy are removed. D) the deadweight loss is reduced if subsidy is removed.
Given the following formula for the Taylor rule:Target federal funds rate = natural rate of interest + current inflation + 1/2(inflation gap) +1/2(output gap) If output in the economy were to fall by an additional one percent below potential, the target federal funds rate would:
A. Increase by 1.5%. B. Remain at 2.5%. C. Decrease by 0.5%. D. Decrease by 1.5%.
At which point might society be able to produce if new resources were discovered but cannot produce with current resources? (See Figure 1.1.)
A. A. B. B. C. C. D. D.
The legislation that prohibited "every contract, combination, ...or conspiracy" that limits competition is the:
A. Federal Trade Commission Act. B. Clayton Act. C. Sherman Act. D. Celler-Kefauver Act.