Which of the following statements is TRUE for society as a whole?
A. Demand for services always reflects all social costs.
B. Social benefits are always emphasized in advertising.
C. Private costs are not always equal to social costs.
D. Supply of services always reflects all social costs.
Answer: C
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Which of the following does free trade encourage?
A) higher rates of economic growth B) more rapid spread of technology C) domestic industries' access to larger markets D) all of the above
Which of the following does NOT affect potential GDP?
A) the quantity of money B) the quantity of labor employed C) the quantity of capital and human capital D) the amount of entrepreneurial talent available E) the quantity of land and natural resources
Employing a fixed-weight index like the Consumer Price Index to adjust a person's salary in response to inflation will overcompensate this person because doing so will allow this person to
A) buy the same bundle of goods as he did before the inflation. B) achieve a higher level of utility than he did before the inflation. C) achieve the same level of utility as before the inflation. D) buy more of all goods.
Suppose that consumers' preferences are well behaved in that properties 4-1 to 4-4 are satisfied. Furthermore, assume that both X and Y are normal goods and that the price of good Y decreases. Then, which of the following effects is known with certainty?
A. The income and substitution effects reinforce one another, leading to an overall increase in the consumption of good X. B. The income and substitution effects will reinforce one another, leading to an overall increase in the consumption of good Y. C. The income and substitution effects reinforce one another, leading to an overall decrease in the consumption of good X. D. The income and substitution effects will have competing effects, leading to an indeterminate impact on the consumption of good X.