Figure 5-3
illustrates the market for a product that generates an external benefit. D1 is the private market demand curve, while D2 is the demand curve including the external benefit. Which of the following is true?
a.
Relative to economic efficiency, output of the good will be too large and the price too low.
b.
Relative to economic efficiency, output of the good will be too large and the price too high.
c.
Relative to economic efficiency, output of the good will be too small and the price too low.
d.
Relative to economic efficiency, output of the good will be too small and the price too high.
c
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In the final two decades of the twentieth century, per capita income in sub-Saharan Africa
A) remained relatively unchanged. B) increased by approximately 35 percent. C) increased by more than 75 percent. D) decreased by approximately 6 percent.
People react to an excess supply of money by:
a. buying bonds, thus driving down the interest rate. b. selling bonds, thus driving down the interest rate. c. selling bonds, thus driving up the interest rate. d. buying bonds, thus driving up the interest rate.
How did Milton Friedman define permanent income?
a) The present value of an individual's past incomes. b) The present value of an individual's future stream of income. c) The future value of an individual's past incomes. d) The future value of an individual's future stream of income.
An increase in the price of a good or service leads to a(n) ________ that leads to a(n) ________.
A. increase in demand; shift of the demand curve B. increase in quantity demanded; shift of the demand curve C. decrease in quantity demanded; movement along the demand curve D. decrease in demand; movement along the demand curve