Denise is thinking about setting up a butterfly garden in her backyard. She estimates that it will cost her $2,000 to purchase and install special plants and an irrigation system to attract butterflies. The benefit she expects to receive is $1,800 . In addition, neighbor Billy will receive a benefit of $150 and neighbor Sammy will receive a benefit of $100 . From this, we can conclude that
a. butterflies are a negative externality for Billy and Sammy
b. Denise will set up the butterfly garden without any help from her free-rider neighbors
c. if Sammy refuses to contribute to the butterfly garden, he will be unable to enjoy its benefits if it is built
d. if Billy refuses to contribute to the butterfly garden, Denise will not have one
e. if Billy and Sammy contribute the amounts at which they value the butterfly garden, Denise will set it up. Otherwise, no garden.
E
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When aggregate planned expenditure is less than GDP,
A) the economy definitely is at its equilibrium expenditure but even so, firms decrease production. B) firms increase production until the economy reaches equilibrium expenditure. C) the economy definitely is at its equilibrium expenditure and firms do not change production. D) firms decrease production until the economy reaches equilibrium expenditure. E) the economy might be at its equilibrium expenditure and if it is, firms do not change their production.
The "Great Moderation" refers to ________
A) sharp declines in asset prices B) the long economic expansion of the 1960s C) the mild economic recoveries of the 1970s and early 1980s D) the "oil tax" of the 1970s E) none of the above
Answer the following statements true (T) or false (F)
1) If competitive firms spent money on advertising their product, their profits would decrease. 2) The profit-maximizing quantity and price is determined after the optimal amount of advertising is determined. 3) To maximize profits, managers should purchase the quantity of advertising that maximizes gross profit. 4) If a firm only has one advertising medium, it maximizes its profit by first setting the marginal benefit from its product equal to its marginal cost of production and then determining the optimal amount to advertise. 5) It is possible for firms to not maximize profits even if they have optimally allocated their fixed advertising budget.
In which one of the following situations is the political process most likely to result in both the acceptance of efficient (productive) programs and the rejection of inefficient (counterproductive) political activities?
a. The people who benefit from a government program pay the costs of the program roughly in proportion to the benefits that each receives. b. The benefits are highly concentrated, and the costs are widespread among voters. c. The costs are highly concentrated, and the benefits are widespread among voters. d. The benefits accrue primarily in the future, while the costs are more visible during the current period.