Suppose the U.S. government has an annual budget of about $4 trillion. Does the U.S. government face the problem of scarcity?
A. No, a government with $4 trillion in spending faces no real constraints.
B. No, scarcity does not apply to governments.
C. Yes, resources are limited even for the U.S. government.
D. Yes, although the U.S. government can easily obtain more resources.
E. Uncertain, economic theory has no answer to this question.
Answer: C
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Two firms, Industrio and Capitalista, have access to five production processes, each of which has a different cost and gives off a different amount of pollution. The daily costs of the processes and the corresponding number of tons of smoke emitted are shown in the table below. Both firms currently use process A, and each emits 4 tons of smoke per day. The government is considering two plans to reduce pollution: requiring both firms to reduce pollution by 25 percent or auctioning pollution permits. Each permit would entitle the owner to emit one ton of smoke per day. Without a permit, no smoke can be emitted. Process(smoke/day) A(4 tons/day) B(3 tons/day) C(2 tons/day) D(1 ton/day) E(0 tons/day) Cost to Industrio ($/day) $350$400$500$700$1,000 Cost to Capitalista
($/day) $225$250$290$400 $600Given that both firms are currently using process A, the cost of requiring the firms to reduce pollution by 25 percent is ________ per day. A. $790 B. $375 C. $215 D. $75
According to the quantity theory of money, if the long-run economic growth rate is 2.5%, by how much should the Fed increase the money supply if it wants inflation to be 2%?
A) 0.5% B) 1.25% C) 4.5% D) 5%
Which of the following statements is not true in a perfectly competitive industry in long-run equilibrium?
A. A profit-maximizing firm may produce any output level at which P < LRAC. B. Every firm produces at an output level at which MC = LRAC. C. There is no entry or exit from the industry. D. No firm earns an economic profit.
As the interest rate increases, _____
a. the supply of loanable funds increases b. the supply of loanable funds decreases c. the quantity supplied of loanable funds increases d. the quantity supplied of loanable funds decreases