By subsidizing the provision of public education, the government
A. pushes the per-unit price that producers of educational services receive above the market clearing price.
B. pushes the per-unit price that consumers pay for educational services below the market clearing price.
C. generates an increase in the quantity of educational services demanded.
D. All of these.
Answer: D
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Markets tend to
A) exist primarily in towns or cities. B) increase transaction costs. C) reduce transaction costs. D) make exchange more difficult.
the most commonly used negative incentive by firms is
What will be an ideal response?
Why do barriers to entry create market power?
What will be an ideal response?
You work as a forecaster for a luxury automobile manufacturer. You know that there is a strong positive relationship between the demand for luxury automobiles and income levels. The government issues a report predicting that it expects income levels to increase steadily over the next 5 years. All else equal, which of the following courses of action would you recommend to the firm?
A. Don't change the amount of investment made, but raise the price of luxury automobiles in response to the expected increase in the demand. B. Start to increase investment now so that when income levels increases and the demand for luxury automobiles increases, the firm will be able to meet the new demand. C. Suggest that the firm curtail its advertising to avert a substantial increase in demand for luxury automobiles. D. Suggest that the firm make an investment in new capital to produce luxury automobiles only after it can verify an increase in income levels.