"Excludability" means that:
A. buyers can restrict other buyers from making purchases in that market.
B. government can prevent consumers from buying the good.
C. when one person buys a good, it is not available for others to buy.
D. sellers can restrict the benefits of a good to those who pay for it.
Answer: D
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The incentive to charge a low price even though it leads to lower profits in Figure 12.3 is an example of:
A. the duopolists' dilemma. B. tying products. C. scarcity and choice. D. the economic problem.
According to classical theory, any changes in aggregate demand will
A. lead to changes in real Gross Domestic Product (GDP), but not in the price level. B. lead to changes in both real Gross Domestic Product (GDP) and the price level. C. lead to changes in the price level. D. have no affect on prices or real Gross Domestic Product (GDP).
Consider an Edgeworth Box economy with two individuals and two goods and suppose that the tastes of both individuals are quasilinear in good 1. a. Suppose initially that individual 1 has relatively little endowment of both good but the competitive equilibrium allocation has him consuming some of each. Illustrate such a competitive equilibrium. b. Now suppose the government is able to redistribute the endowment in this economy (prior to any trade occurring). In order to achieve a more equitable outcome, the government redistributes some of good 1 from individual 2 to individual 1. Show such a redistribution in your Edgeworth Box. c. Assume that both individuals continue to consume at an interior solution in the new equilibrium. How will the two individuals' consumption of good 1 change
from what it would have been without the redistribution? d. Would your answer to (c) differ in any way if the government had instead redistributed good 2 from individual 2 to individual 1? e. How would a sufficiently large redistribution alter your answer? What will be an ideal response?
A free rider is a person who
a. is harmed by another's actions b. is subject to a negative externality c. receives benefits from someone else's market activity but does not pay for them d. pays less than the full value for a good e. wins the state lottery on a ticket he found