Natural monopolies:
A. are the only monopolies that are efficient.
B. generally earn zero accounting profits due to regulations.
C. can capture the lowest production costs possible for the industry.
D. are always protected by government policy.
Answer: C
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Joe sold gold coins for $1,000 that he bought a year ago for $1,000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money because he could have received a 3% percent return on the $1,000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of
A. opportunity costs. B. imperfect information. C. marginal benefits that exceed marginal costs. D. normative economics.
Ricardian equivalence is the proposition that
A) government expenditure should only be financed by taxes. B) it does not matter whether government expenditure is financed by creating new money or issuing debt. C) government expenditure should only be financed by issuing new debt. D) it does not matter whether government expenditure is financed by taxes or debt.
The economic way of thinking suggests competition and cooperation are
A) incompatible. B) mutually destructive. C) present in any society. D) only present in a capitalist market economy.
Markets tend to overallocate resources to the production of a good when
A) there are negative externalities. B) there are positive externalities. C) there are public goods produced. D) equilibrium occurs.