A good is said to be overproduced in an economy if
A. the social marginal cost exceeds the social marginal benefit.
B. the production of the good generates a positive externality.
C. the marginal cost of producing the good is less than its price.
D. the marginal benefit derived from the consumption of the good is more than the price.
Answer: A
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The spread between the bid price and the offer price is a measure of
A) the underwriters' spread. B) brokers' fees. C) liquidity costs. D) sunk costs.
An options contract
A) confers the rights to buy or sell an underlying asset at a predetermined price by a predetermined time. B) is another name for a futures contract. C) may be written for debt instruments, but not equities. D) may be written for equities, but not for debt instruments.
When the Fed lowers the required reserve ratio, it:
a. lowers the cost of borrowing from the Fed, encouraging banks to make loans to the general public b. raises the cost of borrowing from the Fed, discouraging banks from making loans to the general public. c. increases the amount of excess reserves that banks hold, encouraging them to make loans to the general public. d. increases the amount of excess reserves that banks hold, discouraging them from making loans to the general public. e. decreases the amount of excess reserves that banks hold, discouraging them from making loans to the general public.
Which of the following would constitute contractionary monetary policy by the Fed?
a. An increase in income tax rates, a cut in government spending, and an elimination of the investment tax credit b. Open market sales of government securities, an increase in the discount rate, and an increase in reserve requirements c. An increase in tariffs on imported goods and a decrease in foreign aid d. Open market purchases of government securities, a cut in the discount rate, and an increase in reserve requirements