When a good is both rivalrous and nonexcludable the:
A. good is likely an artificially scarce good.
B. good is likely a private good.
C. free rider problem may arise.
D. tragedy of the commons may arise.
Answer: D
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Suppose farmers in a given market can either grow soy beans or corn on their land. In addition, suppose an increase in the demand for corn causes the price of corn to increase. All else equal, an increase in the price of corn creates an incentive for farmers to:
A. switch away from growing soy beans and into growing corn. B. switch away from growing corn and into growing soy beans. C. grow less corn, but not change their production of soy beans. D. grow more corn, but not change their production of soy beans.
We would expect the cross elasticity between tennis racquets and tennis balls to be:
a. negative. b. positive. c. zero. d. one. e. infinite.
If a regulatory commission sets the regulated price equal to marginal cost for a natural monopoly:
a. losses will result. b. government subsidies will be unnecessary. c. the firm will earn economic profits. d. new firms will want to enter. e. resource use will not be optimal.
Tax distortions refer to the cost of inflation that comes from:
A. the time, money, and effort one has to spend managing cash in the face of inflation. B. the money, time, and opportunity used to change prices to keep pace with inflation. C. being penalized via taxes for making more money in dollars, even though real purchasing power hasn't changed at all. D. labor costs associated with inflation.