Why does an efficient distribution of outputs among households occur in perfectly competitive markets?
What will be an ideal response?
Competitive markets ensure that households don't end up with the wrong goods and services. A household will buy a good as its willingness to pay for it is greater than (or equal to) its price. Therefore, as long as households are free to choose how to spend their incomes, they cannot end up with the wrong combinations of goods.
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The marginal revenue curve for a perfectly competitive firm
A) is the same as its demand curve. B) is perfectly inelastic. C) is downward-sloping. D) is the same as its marginal cost curve.
If a firm hires lazy employees,
A) it must pay them differently or hard-working employees will engage in moral hazard. B) it must pay them more or hard-working employees will engage in moral hazard. C) it must fire them before their laziness spreads to hard-working employees. D) the lazy employees make hard-working employees look good.
Modern monetarists view any increases or decreases in total output stemming from expansions or contractions in the money supply as
A) permanent. B) temporary. C) irrelevant. D) extremely important.
An increase in the real interest rate outside of the United States will ________ the demand for the dollar and ________ the demand for foreign financial assets
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease