Why study perfect competition, if it rarely exists?
Perfect competition is the circumstance where the market performs best, demonstrating Adam Smith's "invisible hand" in action. Each firm, acting in its own self-interest-the pursuit of maximum profit-ends up acting in society's best interest; products are produced and sold at minimum average cost in the long run. Also, even if the conditions of the model are not fulfilled, firms may still act as if the assumptions held. So the model's predictive power may extend beyond the cases of agricultural and stock markets.
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When the Federal Reserve raises the growth rate of the money supply to a permanently higher level, this produces ________ in real GDP and ________ in the inflation rate
A) a permanent increase, a permanent increase B) a permanent increase, a temporary increase C) no change, a temporary increase D) a temporary increase, a temporary increase E) a temporary increase, a permanent increase
The implicit cost of ownership:
A. is a cognitive bias. B. is an unproven concept. C. is the monetary opportunity cost that is often overlooked. D. All of these are true.
A trade deficit experienced by a country during a year generally signals the poor health of the economy
a. True b. False Indicate whether the statement is true or false
When individuals take externalities into account when making decisions, economists say they are:
a. internalizing the externality. b. eliminate the externality. c. subsidize a positive externality. d. subsidize a technology spillover.