What is the ceteris paribus condition?
What will be an ideal response?
The ceteris paribus condition is the requirement that when analyzing the relationship between two variables, such as price and quantity demanded, other variables must be held constant.
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Who is affected when a Pigouvian tax is imposed on a market with a negative production externality?
A. Producers B. Consumers C. Those affected by the externality D. All of these groups are affected when it becomes internalized.
Figure 9.3 represents the market for used refrigerators. Suppose buyers are willing to pay $300 for a plum (high-quality) used refrigerator and $100 for a lemon (low-quality) used refrigerator. If buyers believe that 50% of used refrigerators in the market are lemons (low quality), what fraction of used refrigerators sold will actually be lemons (low quality)?
A. 50/250 B. 50/300 C. 250/300 D. All of the refrigerators sold will be lemons.
If a monopolistically competitive firm is producing an output level where its marginal cost is equal to its marginal revenue but it still earns a loss, then it should always shut down in the short run.
Answer the following statement true (T) or false (F)
The measured unemployment rate does not rise as much as one might expect when output decreases because, as the economy contracts
A. more people enter the labor force. B. more people leave the labor force. C. more people find jobs. D. firms want to hire additional workers.