In the Keynesian model, firms are best characterized as
A. price takers.
B. irrational.
C. monopolistically competitive.
D. perfectly competitive.
Answer: C
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Adam Smith's Wealth of Nations, written in 1776, describes the market's invisible hand representing the
A) King of England's control over the colonies. B) control all governments have in organizing the market. C) efficiency the market achieves without the interference of governments. D) inefficiency of markets when governments do not organize them. E) invisible command system that efficiently allocates resources.
If diminishing marginal returns is in effect
A) marginal costs fall. B) marginal costs rise. C) average costs fall. D) average revenue is constant.
To counteract the depreciation of the national currency against the U.S. dollar, the central bank of a country can intervene in the foreign exchange market. Which of the following imposes a restriction on this ability of the central banks to maintain a fixed exchange rate?
a. The central banks have a limited amount of international reserve. b. The central banks have a limited amount of domestic currency. c. Unrestricted sale of foreign currency will cause inflation in the domestic economy. d. The supply of dollars is perfectly elastic in the foreign exchange market. e. The central banks need to maintain a certain amount of its assets in the form of gold.
Which of the following is true of a network externality? a. It is the effect that consumers have on other consumers of the same or a compatible product. b. It occurs because producers do not internalize the externality
c. It is a negative spillover effect from a private market transaction. d. It occurs because consumers do not internalize the externality.