If social cost exceeds private cost, there is
A. a negative externality.
B. a positive externality.
C. an economic loss in the activity.
D. underproduction of a good.
Answer: A
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La Dila and Swiss Pro are the only two firms in an industry. The firms initially charge equal prices for their products, which are perfect substitutes. What happens if La Dila decides to lower its price slightly?
A) La Dila will lose all its market share. B) Swiss Pro will gain market share. C) La Dila will face the entire market demand. D) Swiss Pro will earn positive economic profits.
In the simplest Keynesian model of the determination of income, interest rates are assumed to be
A) exogenous and to gradually change. B) endogenous and to gradually change. C) exogenous and to remain constant. D) endogenous and to remain constant.
When economists talk about a demand schedule for a product, they mean
A) the amount of a good that consumers intend to purchase at each price in a set of possible prices in a given time period. B) the amount of a good that consumers are able to purchase (though they might not be willing to) at different prices in a given period of time. C) the amount of a good that consumers intend to purchase at only one particular price in a given period of time. D) the amount of a good that producers are willing to make available for sale at a particular price in a given time period.
The long-run aggregate supply curve represents:
A. potential output in the economy. B. the level of output possible if the economy is operating at full capacity. C. a production function for the entire economy. D. All of these are true.