What would happen in a free market system when production of a good generates negative externalities?
A) There is a shortage of the good.
B) There is a surplus of the good.
C) The equilibrium quantity of the good is less than the efficient amount.
D) The equilibrium quantity of the good is more than the efficient amount.
Answer: D
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Your roommate Hansen argues that American producers cannot compete with foreign producers because wages are lower in foreign countries than in the United States. Hansen
A) is incorrect. Free trade raises living standards by increasing economic efficiency. B) is advancing the anti-dumping argument for protectionism. C) is correct in arguing that the high wages of U.S. workers make it impossible to compete with workers in low-wage countries. D) is right in asserting the need to protect high wages if the United States wishes to maintain its high standard of living.
Another term for the equilibrium price is
A) excess demand. B) nominal price. C) law of demand. D) market clearing price.
When the reserve requirement changes, which of the following will change for an individual bank?
A. Transactions account balances and lending capacity. B. Total reserves, required reserves, and excess reserves. C. Required reserves, excess reserves, and lending capacity. D. Transactions account balances, total reserves, and excess reserves.
Assume that the central bank increases the reserve requirement. If the nation has low mobility international capital markets and a flexible exchange rate system, what happens to the quantity of real loanable funds per time period and current international transactions in the context of the Three-Sector-Model?
a. The quantity of real loanable funds per time period falls, and current international transactions become more negative (or less positive). b. The quantity of real loanable funds per time period rises, and current international transactions become more negative (or less positive). c. The quantity of real loanable funds per time period and current international transactions remain the same. d. The quantity of real loanable funds per time period rises, and current international transactions remain the same. e. There is not enough information to determine what happens to these two macroeconomic variables.