For government to correct for the failure of market outcome, it must do all of the following except:
A. act only if the marginal costs exceed the marginal benefits.
B. have the ability to do something positive about the problem.
C. recognize the problem.
D. have the will to do something positive about the problem.
Answer: A
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Monopolistic competition is defined as a type of market structure where
A) many firms produce the good. B) firms produce a homogeneous good. C) there are barriers to entry. D) firms can earn positive profit in the long run.
Refer to Figure 9.1. If the government establishes a price ceiling of $20, how many widgets will be sold?
A) 20 B) 30 C) 40 D) 50 E) 60
Under adaptive expectations theory, people expect the rate of inflation this year to be:
a. zero, regardless of the rate last year. b. the same as last year. c. the rate based on predictable and fiscal policies. d. All of these.
Per capita real GDP is a questionable indicator of the state of the economy because it does not account for:
a. growth of national income. b. changes in inflation. c. income distribution. d. changes in the size of the population. e. changes in the level of output.