If markets are perfectly competitive, then the production of goods
A) will use the least costly combination of resources.
B) will occur at an average total cost value that is above the minimum.
C) will require government intervention.
D) will always lead to business failures.
Answer: A
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If one producer has control over an entire market and underproduces, the producer will
A) increase producer surplus by lowering pollution costs. B) increase consumer surplus by lowering producer surplus. C) increase both consumer and producer surplus. D) create a deadweight loss. E) decrease the deadweight loss that would exist if the market were efficient.
Maria lives next door to Alice. Alice regularly plays loud music, which often disturbs Maria. Maria went over to Alice's house yesterday and asked her to turn down her music because loud music adversely affects her. Alice has complied. Which of the following best describes the economists' view of what has happened?
A. The marginal social benefits of loud music were greater than the marginal private costs of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs. B. The marginal social costs of loud music were greater than the marginal private costs of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs. C. The marginal social costs of loud music were greater than the marginal private costs of loud music and the problem was solved through a reassignment of property rights. D. The marginal social costs of loud music were greater than the marginal social benefits of loud music and the problem was solved by Maria persuading Alice to internalize her (Maria's) external costs. E. none of the above
A firm's cost curve is determined by
A) congressional laws. B) whether the firm hires engineers or not. C) natural laws. D) the firm's production function.
Which of the following is most likely to shift the potential output of an economy to the right?
a. A decline in the length of the average workweek b. An increase in the supply of educated and skilled workers c. A drought d. An increase in aggregate demand e. An increase in the minimum wage received by workers