The price index in the base year always equals_____
a. 0
b. 10
c. 100
d. 1
e. 0.01
c
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If negative externalities are present in a market, ________
A) the price charged in the market is higher than the socially optimal price B) the quantity supplied in the market is larger than the socially optimal level C) the marginal social cost of production is lower than the marginal private cost D) the average cost of production exceeds the marginal cost of production at all output levels
Private entrepreneurs are likely to make better investment decisions than central planners because
A) entrepreneurs can often turn a project's failure into a request for additional funding to rectify the "problem". B) the failure of a government project reduces the personal wealth of the planners involved in the decision. C) entrepreneurs seek ever larger budgets, while planners are more focused on cost reductions and efficiency. D) investors who make mistakes must bear the costs of these mistakes personally.
In a liquidity trap:
a) monetary policy is very effective in changing income and output. b) fiscal policy is ineffective in changing income and output. c) monetary policy is ineffective in changing income and output. d) monetary policy is somewhat effective in changing income and output in the short-run.
Which of the following criteria should be used to evaluate if government intervention in a market for the purpose of environmental protection is justified?
A) Is the intervention program economically efficient? B) Does the intervention program reduce pollution to zero? C) Does the intervention program maximize economic surplus? D) Does the intervention program minimize environmental damage?