According to the Theory of the Second Best, why might market liberalization through elimination of some market distortions, such as particular trade restrictions, lead to social welfare losses?
What will be an ideal response?
Removing some distortions may increase the deadweight losses accrued from other distortions. This may lead to a net loss from reducing trade restrictions.
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Which of the following is an impact of a rent ceiling set below the equilibrium rent?
A) Renters find apartments to rent more rapidly because the rent ceiling is lower. B) Landlords' incentives to provide apartments decrease. C) The supply of apartments increases as soon as the rent ceiling is imposed. D) A surplus of housing occurs. E) Search for apartments decreases because renters need no longer search for the apartment with the lowest rent.
Would you expect the cross-price elasticity of demand between ham and turkey to be positive or negative? Why?
What will be an ideal response?
The cost involved when choosing between alternatives is known as the
A. sunk cost. B. normative cost. C. marginal cost. D. opportunity cost.
A demand curve that is horizontal indicates that the commodity
A) has few substitutes. B) must be very cheap. C) has a large number of substitutes. D) is a necessity.