If investment increases by $100 and, as a result, gross domestic product (GDP) ultimately increases by $200, the multiplier equals
What will be an ideal response?
Answer: 2
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Suppose the Economics Department has a graduation party for its students but as a final test they must show they have learned something about trade. The men are given food when they walk in and the women are given drink. Suppose they have identical preferences where food and drink provide utility U = F?D? . The exchange would be such that
a. both would be guaranteed to be better off than when they entered. b. both would be guaranteed to be at least as well off as when they entered. c. the men would end up with more. d. the women would end up with more.
A limit on special-interest contributions to national political campaigns
a. would give challengers an edge over incumbents b. is usually supported by special-interest groups as a way of saving money c. would involve widespread costs and concentrated benefits d. would reduce the extent of rent seeking e. is an example of competing-interest legislation
Your best friend advocates the forced break-up of large firms, such as General Motors and Ford, on the grounds that they have a lot of monopoly power which they use to charge inefficiently high prices. According to Schumpeter, would breaking apart these gigantic firms guarantee consumers lower prices? Explain
Which of the following is not a requirement for the existence of monopolistic competition in a market?
A. Numerous small sellers B. Full information about the market among buyers and sellers C. Product homogeneity D. Freedom of entry into the market