Suppose that in 2016, all prices in the economy double and that all wages and salaries also double. In 2016 you
A) are no better off or worse off than you were in 2015 as the purchasing power of your salary has remained the same.
B) are worse off than you were in 2015 as you can no longer afford to buy as many goods and services.
C) are better off than you were in 2015 as your salary is higher than it was in 2015 and you can now buy more goods and services.
D) cannot determine whether you are better off or worse off than you were in 2015, because the purchasing power of your salary cannot be determined.
A
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In the market for insurance
A) sellers are protected from lawsuits brought by buyers. B) demand is perfectly inelastic because, by law, home owners and automobile drivers must have insurance. C) sellers often have better information than buyers. D) buyers often have more information than sellers.
If external benefits are taken into account in the market
A) the demand curve would shift to the left. B) the supply curve would shift to the left. C) the demand curve would shift to the right. D) the supply curve would become vertical.
Sometimes the government deals with externalities by creating laws to regulate behavior instead of using taxes to correct the market failure. So, requiring auto manufacturers to install a device called a catalytic converter which removes some toxins from exhaust may be preferable to a gas tax that reduces driving levels. This route is often preferred because:
a. c and e. b. it requires less technological development. c. it doesn't penalize drivers of clean cars. d. only car drivers pay for the externality. e. the cost of the externality is unknown.
Alan is sitting in a bar drinking beers that cost $4 each. According to the economic decision rule, Alan will stop drinking when the marginal:
A. cost remains at $4. B. benefit to him of an additional beer is less than $4. C. cost to him of an additional beer is less than the marginal benefit. D. benefit to him of an additional beer is greater than $4.