What is an externality?
What will be an ideal response?
An externality is a situation in which private costs diverge from social costs because there are external costs. External costs are costs not borne by the parties engaged in the exchange or by an individual engaged in a resource-using activity.
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Which model highlights the effects of market power obtained from product differentiation?
a. The contestable market model. b. The Cournot model of oligopoly. c. The Bertrand model of oligopoly. d. The monopolistic competition model.
Suppose Sarah owns a small company that makes wedding cakes. The table below shows how Sarah's total cost varies depending on the number of wedding cakes she makes each day.Number ofCakes Per DayTotal CostPer Day0$1001$1802$2203$3004$4005$5206$660If the market for wedding cakes is perfectly competitive, and wedding cakes sell for $125 each, then at her profit-maximizing level of output, Sarah's profit will be ________ per day.
A. $90 B. $625 C. $105 D. $100
Holding money as a store of value instead of other assets is
A) the capital demand for money. B) the asset demand for money. C) the precautionary demand for money. D) the transactions demand for money.
The original intention of the Fed's role as lender of last resort was to make loans to banks that were
A) not illiquid nor insolvent. B) illiquid, but not insolvent. C) insolvent, but not illiquid. D) both illiquid and insolvent.