Explain what economic efficiency is. How does a price system lead to economic efficiency?
What will be an ideal response?
Market failure is a situation in which a market economy either allocates too few or too many resources to a specific economic activity. That is, it is a situation in which a market economy does not achieve economic efficiency. The price system achieves economic efficiency as long as there are not any market failures. But, when there are market failures, an unregulated price system does not achieve economic efficiency, and there is a potential role for government to intervene in some way to bring about an efficient situation.
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Why would a new limit on trade in goods with the United States by Canada be more important to the U.S. economy than the same type of policy in Italy? a. Canadians speak English so U.S. citizens are more interested in what they do. b. Canada has greater natural resource access than the U.S
c. Canada is one of the U.S.' largest trading partners. d. Canada uses the U.S. dollar as an official currency.
Which of the following is most likely to reduce the market wage rate in a job category?
a. The job is widely viewed as dangerous. b. The job requires employees to move from city to city quite often. c. The job requires substantial out-of-town travel. d. Employees have considerable flexibility in choosing their work hours.
Other things equal, an increase in government spending ________ the equilibrium interest rate and ________ equilibrium output.
A. decreases; decreases B. increases; decreases C. increases; increases D. decreases; increases
Refer to Figure 2-13. Which two arrows in the diagram depict the following transaction: Lizzie Haxem hires "The Paint Pros," a professional painting company, to paint her home
A) J and G B) K and M C) K and G D) J and M