Suppose the perfectly competitive equilibrium occurs such that too many units of the good are produced. This is an example of
A) marginal cost pricing.
B) market failure.
C) firms have not yet exited the industry.
D) greedy business people behaving in an inappropriate manner.
Answer: B
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If the fraction of the economy's nominal GDP held by the public in the form of money is 20 percent, income velocity in the economy is
A) 5. B) 80 percent. C) 0.20. D) 20.
The free rider problem occurs when
a. individual gainers will not contribute the side payment needed for an efficient outcome b. those harmed will not contribute the side payment needed for an efficient outcome c. side payments are not necessary for an efficient outcome d. the marginal cost of arranging a side payment is zero e. the total cost of arranging a side payment is zero
A high-risk premium makes default more likely.
Answer the following statement true (T) or false (F)
If you negotiated a salary based on an anticipated inflation rate of 4 percent, and the actual inflation rate turned out to be 6 percent:
A. the purchasing power of your real wages would be more than you anticipated. B. your employer would have gained at your expense. C. your real wage will increase, but your nominal wage will decrease. D. the purchasing power of your wages will not change, since purchasing power is based on your nominal wage.