Consumer surplus measures
A) the extra amount that a consumer must pay to obtain a marginal unit of a good or service.
B) the excess demand that consumers have when a price ceiling holds prices below their equilibrium.
C) the benefit that consumers receive from a good or service beyond what they pay.
D) gain or loss to consumers from price fixing.
C
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For inflation to have no real effect on the economy, leaving all decisions and their real outcomes unchanged, five conditions must be met. Which of the following incorrectly states one of those conditions?
A) Inflation is universally and accurately anticipated. B) All savings and money earn the nominal interest rate. C) Inflation of p0 percent lowers the nominal interest rate by p0 below the no-inflation nominal rate. D) Only real interest income is taxable and only the real cost of borrowing is tax-deductible. E) Inflation raises the prices of all goods by the same percentage.
Figure 10-1
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If the perfectly competitive firm depicted in Figure 10-1 is currently producing at C, its profits
A. are equal to zero. B. are negative, that is, it is suffering a loss. C. are maximized. D. could be higher if the firm produced at D.
Pollution abatement is likely to be most costly under: a. a compliance standard
b. a per-unit pollution tax system. c. a system of transferable pollution rights. d. Costs are the same under all three pollution control policies.
The Lucas critique focuses specifically on:
A. the role that economic policymaking has on people's economic behavior. B. the relationship between Fed policy and the money supply. C. the inability to measure economic performance accurately. D. the moving away from fixed exchange rates to flexible exchange rates.