Which of the following is a good example of efficient specialization and voluntary exchange?
A. A college professor hires someone to rototill his or her garden to ready it for spring planting.
B. A college professor works on the engine of a car for a neighbor who is a mechanic.
C. A lawyer decides to babysit his or her young child and agrees to do so for others for cash.
D. A physician agrees to help a neighbor work on his or her income tax return in exchange for his or her bookkeeping services.
Answer: A
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If one producer has control over an entire market and underproduces, the producer will
A) increase producer surplus by lowering pollution costs. B) increase consumer surplus by lowering producer surplus. C) increase both consumer and producer surplus. D) create a deadweight loss. E) decrease the deadweight loss that would exist if the market were efficient.
Loud music from a neighbor's party is
A) a negative externality whether or not you like it. B) a positive externality whether or not you like it. C) a positive externality if you like the music, and a negative externality if you don't. D) a negative externality if you like the music, and a positive externality if you don't. E) not an externality.
A technological innovation that reduces a firm's cost of producing additional units of output will lead to:
A. an increase in the quantity supplied by the firm, but no change in the firm's supply. B. a decrease in the firm's supply. C. an increase in the firm's supply. D. a decrease in the quantity supplied by the firm, but no change in the firm's supply.
Figure 4-13
Refer to . The exhibit illustrates the impact of granting a subsidy on a particular good. Which of the following is true for this subsidy given the information provided in the exhibit?
a.
The subsidy has been statutorily (legally) paid to sellers.
b.
The subsidy results in a decrease in the market selling price of the good.
c.
Sellers will receive a larger proportion of the benefit from this subsidy than buyers.
d.
The subsidy results in a reduction in the quantity purchased.