How do the concepts of market failure and failure of market outcome relate to the concept of Pareto optimality?
A. Market failure is judged by the criteria of Pareto optimality; failure of market outcome rejects Pareto optimality as the sole criterion.
B. Failure of market outcome is judged by the criteria of Pareto optimality; market failure rejects Pareto optimality as the sole criterion.
C. Both market failure and failure of market outcome reject the criteria of Pareto optimality for another criterion.
D. Both market failure and failure of market outcome are judged by the criteria of Pareto optimality.
Answer: A
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Suppose the government spending multiplier is 2. The federal government cuts spending by $40 billion. What is the change in GDP if the price level is not held constant?
A) a decrease of more than $80 billion B) an increase of less than $80 billion C) an increase equal to $80 billion D) an increase of greater than $80 billion E) a decrease of less than $80 billion
All of the following are required to make a tying arrangement vulnerable to antitrust prosecution except which one?
A) There must be some nontrivial amount of commerce affected by the tying contract. B) There must be proof of an actual tie between two products. C) There must be at least two products involved. D) The seller cannot have substantial market power in the market for the tying product.
An increase in the demand for a good means that:
a. the demand curve has shifted to the left. b. the good's price has fallen and, as a result, consumers are buying more of the good. c. the good has become scarce. d. consumers are willing to purchase more of the good at each possible price.
Foreign repercussions of changes in domestic spending may cause:
a. the GDP gap to be larger than the recessionary gap. b. the equilibrium income to increase by an amount equal to the change in net exports. c. the actual spending multiplier to be larger than the reciprocal of the marginal propensity to save plus the marginal propensity to import. d. equilibrium income to rise by a smaller amount than evidenced by the multiplier effect of autonomous spending increase. e. the real GDP to be larger than potential GDP.