What three assumptions must hold for the allocation of resources among firms to be efficient?
What will be an ideal response?
For the allocation of resources among firms to be efficient, factor markets must be competitive and open, all firms must pay the same price for inputs, and all firms must maximize profits.
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Consider a market in which there is an external benefit. A private subsidy paid to producers can be used to arrive at the efficient market equilibrium because the subsidy will
A) increase the quantity produced. B) decrease the supply of the good. C) increase the price demanders pay. D) decrease demand.
The expected real interest rate is equal to
A) the nominal interest rate minus the expected rate of inflation. B) the nominal interest rate plus the expected rate of inflation. C) the nominal interest rate minus the actual rate of inflation. D) the nominal interest rate plus the actual rate of inflation.
When a good is excludable,
a. one person's use of the good diminishes another person's ability to use it. b. people can be prevented from using the good. c. no more than one person can use the good at the same time. d. everyone will be excluded from using the good.
Economic models do all of the following except
A) answer economic questions. B) portray reality in all its minute details. C) make economic ideas explicit and concrete for use by decision makers. D) simplify some aspect of economic life.