When producing a good generates negative externalities, the private market for that good tends to produce too:
A. little of the product at too low a price.
B. little of the product at too high a price.
C. much of the product at too low a price.
D. much of the product at too high a price.
Answer: C
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The owner of a garage makes large contributions to a politician who is seeking the office of state governor. If his candidate wins, he will get the contract, which now resides with a competitor, to repair State Police vehicles. This is an example of
A. moral hazard. B. externality. C. rent seeking. D. investment.
Refer to the above table. If opportunity costs are constant, each nation produces only the one good for which it has a comparative advantage, and trade can occur between the two countries
A) country X will produce product A and country Y will produce product B. B) country X will produce product B and country Y will produce product A. C) country X will refuse to trade with country Y since country X has a comparative advantage in both products. D) country Y will refuse to trade with country X since country Y has a comparative advantage in both products.
The buying and selling of foreign currency by the central bank is a trade policy whose objective is:
A. reducing purchases of assets abroad. B. stabilizing the exchange rate against external shocks. C. stabilizing the interest rate against foreign capital outflows. D. promoting long term economic growth.
Increasing investment in the present means forgoing future consumption.
Indicate whether the statement is true or false