Clint, Lee and Eli are the only three residents of the village of Fantasma. They are considering whether to construct a hiking trail in the mountains surrounding the village. Because congestion on the trail is unlikely, it would be nonrival. Clint values the trail at $300 per month, Lee values the trail at $100 per month, and Eli values the trail at $80 per month. The cost of building and maintaining the trail is $420 per month. Given this information, it is:
A. not socially optimal to build the trail if it is paid for through taxes.
B. socially optimal to build the trail.
C. only socially optimal to build the trail if the majority of voters are in favor.
D. not socially optimal to build the trail.
Answer: B
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Refer to Figure 26-11. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B
A) the unemployment rate is very, very low. B) incomes and profits are rising. C) firms are operating above their normal capacity. D) the economy is below full employment. E) there is pressure on wages and prices to rise.
Which of the following would cause a rightward shift in the demand curve for gasoline?
I. A large increase in the price of public transportation. II. A large decrease in the price of automobiles. III. A large reduction in the costs of producing gasoline. A) I only B) II only C) I and II only D) II and III only E) I, II, and III
In a free market for rental housing, effective rent control would have which effect?
A. It would cause a reduction in the number of available apartments. B. It would cause an increase in the number of available apartments, since landlords would try to increase their profits through larger scale. C. It would have no effect on the number of available apartments offered in the market. D. The results are impossible to predict.
After experiencing its first budget surplus in 30 years in 1998, for how many consecutive years following that did the budget remain in a surplus state?
A) 1 B) 2 C) 3 D) 4