Scarcity implies that the allocation scheme chosen by society can
A. always make more of all goods, simultaneously.
B. not make more of any one good.
C. typically make more of a good but at the expense of making less of another.
Answer: A
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Suppose a firm pollutes a river when it produces a product. To achieve the efficient amount of output, a government could impose a ________ that equals the ________ of the pollution
A) pollution charge; marginal social cost B) pollution charge; marginal external cost C) pollution tax; marginal social cost D) pollution tax; marginal external cost E) pollution subsidy; marginal social cost
Using the data in the above table, in the long-run macroeconomic equilibrium, the price level is ________ and the level of real GDP is ________
A) 115; $10 trillion B) 110; $10 trillion C) 105; $11 trillion D) 115; $11 trillion
The drawback to calculating real GDP using base-year prices is that
A) relative prices change over time and these are not reflected in base-year prices, and this distorts GDP. B) quality changes are reflected in base-year prices. C) relative prices change over time and these changes are reflected in base-year prices. D) real GDP in one year is not comparable to real GDP in another year.
Empirical studies find that exchange rates are much more variable than inflation differentials. How can we explain this empirical result?
What will be an ideal response?