A shift from S1 to S2 reflects the change that happens when a negative externality is taken into account. A shift from D1 to D2 reflects the change that happens when a positive externality is taken into account.Refer to the above figures. Externalities exist in both panels. After correcting for the externalities the prices should be
A. P1 and P3.
B. P1 and P4.
C. P2 and P3.
D. P2 and P4.
Answer: D
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If the ATC curve has a positive slope, then the MC curve must be
A) horizontal. B) vertical. C) above the ATC curve. D) below the ATC curve.
A sharp increase in the divorce rate increases the number of lawyers hired to determine divorce settlements. This will
A) increase GDP and decrease well-being in the economy. B) decrease GDP and decrease well-being in the economy. C) increase GDP and increase well-being in the economy. D) decrease GDP and increase well-being in the economy.
In response to an increase in the wage rate, the substitution effect will cause a person to
A) supply fewer hours of labor. B) supply more hours of labor. C) supply the same hours of labor. D) have a backward bend in her labor supply curve.
Long-run equilibrium in the goods and services market requires that decision makers who agreed to long-term contracts must have
a. incorrectly anticipated the level of prices when they made the agreements. b. correctly anticipated the level of prices when they made the agreements. c. correctly anticipated the natural rate of unemployment when they made the agreements. d. correctly anticipated actual GDP when they made the agreements.