Explain whether the market produces too little, too much, or the right amount: (a) of goods with detrimental externalities; (b) of goods with public good characteristics
For goods with detrimental externalities, the market produces too much; P = private MC, and private MC is below social MC. Using SMC would lead to the socially efficient lower output level. For public goods, the market produces too little. Assuming exclusion of nonpayers is possible, the market will charge a price even though the opportunity cost of an additional user is zero. There will be too few users, from an efficiency standpoint. There will be even greater inefficiency if it is impossible to exclude nonpayers as private firms will be unwilling to provide goods where they cannot prevent free access. (Computer software displays public good difficulties.)
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Which of the following is true of the expenditure-based method of national accounting?
A) It does not track the purchase of goods and services by the government. B) It only tracks the purchase of goods and services by the government. C) It tracks the purchase of investment goods by firms and households. D) It does not track the purchase of services by households.
A 6 percent increase in the price of a good results in a 36 percent increase in the quantity supplied. In this case, the price elasticity of supply is ______.
a. –30 b. +6 c. +42 d. –216
The change in the quantity of labor demanded resulting from a change in the relative cost of labor is known as the ________ effect.
A. input-substitution B. price elasticity C. output D. derived demand
Which approach to measuring money focuses on the value of currency, transaction deposits, and travelers checks?
A. M2 B. the transactions approach C. the liquidity approach D. near moneys