Which of the following is a source of market failure?
A) unforeseen circumstances which leads to the bankruptcy of many firms
B) a lack of government intervention in a market
C) incomplete property rights or inability to enforce property rights
D) an inequitable income distribution
Answer: C
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A market has four individuals, each considering buying a grill for his backyard. Assume that grills come in only one size and model. Abe considers himself a grill-master, and finds a grill a necessity, so he is willing to pay $400 for a grill. Butch is a meat-lover, honing his grilling skills, and is willing to pay $350 for a grill. Collin just met the girl of his dreams, and she loves a good grilled steak, so in his effort to impress her he is willing to pay $320 for a grill. Daniel loves grilled shrimp and thinks it might be cheaper in the long run if he buys a grill instead of eating out every time he wants grilled shrimp, so he is willing to pay $200 for a grill.
If the market price of grills falls from $375 to $330, given the scenario described, which of the following can be said? A. Butch will join the market, but receive no consumer surplus. B. Butch and Collin will join the market, and together will receive $30 in consumer surplus. C. Abe will experience a decrease in consumer surplus of $45. D. Abe will experience an increase in consumer surplus of $45.
In Figure 1 below if the economy were at Y3 then we would expect there to be:
A. an increase in production since PAE < actual output.
B. an increase in production since PAE > actual output.
C. no change in production since PAE = actual output.
D. a decrease in production since PAE < actual output.
Which of the following is an example of a vertical merger?
A) Northwestern Idaho University merging with McDonald's. B) Northwestern Idaho University merging with a training academy for new professors. C) Northwestern Idaho University merging with Roosevelt University. D) Northwestern Idaho University going from a public to a private university.
Macroeconomics helps explain economic fluctuations, why the economy shrinks and expands and why some of the economy's resources are idle
Indicate whether the statement is true or false