If the government wanted to encourage savings by offering a tax break, such a policy would work if the supply curve for financial capital is
a. elastic.
b. steep.
c. inelastic.
Answer: a. elastic.
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Refer to the market diagram. Of the surplus that the consumers lose because there is a monopoly (and not perfect competition), how much has become deadweight loss?
The following questions refer to the accompanying market diagram. PC and QC are the equilibrium price and quantity if the firm behaves competitively, and PM and QM are the equilibrium price and quantity if the firm is a simple monopoly.
a. Area E
b. Area H
c. Area E + H
d. Area C + D + H
Economists may disagree about how to solve an economic problem because they
A. use different models to analyze the problem and its solutions. B. have different political and moral beliefs. C. disagree about the facts of the situation. D. All of these responses are correct.
Increased investment spending in the economy would be a possible result of
A) an increase in interest rates. B) a decrease in the money supply. C) an open market sale of bonds by the Fed. D) an open market purchase of bonds by the Fed.
The assumption of asymmetric information means that
A) borrowers and lenders have the same information. B) borrowers and lenders have perfect information. C) borrowers know more than lenders. D) lenders know more than borrowers.