If Nathan is willing to pay up to $3 for an ice cream but he actually pays $2 for it. The consumer surplus of the ice cream for Nathan
A. is $2.
B. is $3.
C. is $1.
D. cannot be determined without information about the market structure.
Answer: C
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An economic model will produce poor predictions if it includes unrealistic assumptions
a. True b. False
Above-normal profits earned by existing firms in a perfectly competitive market will eventually lead to:
a. exit of the firms from the market. b. an increase in the market price of the good. c. entry of new firms into the market. d. a decrease in the aggregate supply. e. the existing firms emerging as price makers.
If the price of inputs rises and personal income taxes rise:
a. Price index falls, and real GDP falls. b. Price index falls, and the change in real GDP is uncertain. c. The change in price index is uncertain, and real GDP rises. d. The change in price index is uncertain, and real GDP falls. e. Neither the price index nor real GDP changes.
Which of the following is a merit good?
A. Food. B. Cigarettes. C. Local telephone service. D. A computer operating system.