Suppose residents of Toadhop live on the Quabache River, a river prone to flooding. Suppose there are 1000 (type A) people who value flood control more than the 1000 (type B) people. Type A Demand QD = 100 ? P Type B Demand QD = 50 ? P Where Q measures the quality of flood control. If the price of a unit of flood control is $100,000 and the citizens of Toadhop gather for a townhall meeting to
find the socially optimal level of flood control, and they are successful, they will pick Q equal to
a. 0
b. 10
c. 25
d. 70
c
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Answer the following statement(s) true (T) or false (F)
1. Speculators will sell futures contracts when they believe future demand will be lower than suppliers expect. 2. Diversification tends to raise the standard deviation of a portfolio. 3. Risk-averse investors choose to hold only two assets: a risk-free asset and a market portfolio 4. When faced with two portfolios that offer the same expected return, a risk-averse investor prefers the one with the higher standard deviation. 5. There is only one possible market portfolio-the portfolio consisting of all the risky assets in the economy.
Assume a closed economy, that taxes are fixed, and the marginal propensity to consume is equal to 0.8. What is the government spending multiplier?
A) 10 B) 5 C) 4 D) 3
The ratio of the prices of two goods multiplied by -1 is equal to the slope of the budget line
a. True b. False
A Keynesian short-run aggregate supply curve has a flatter portion and a steep portion. How does an increase in aggregate demand affect the price level differently across these two portions?
a. There is a sharp increase in the price level across the flatter portion and a small increase in the price level across the steep portion. b. There is a sharp decrease in the price level across the flatter portion and a small decrease in the price level across the steep portion. c. There is a small increase in the price level across the flatter portion and a sharp increase in the price level across the steep portion. d. There is a small decrease in the price level across the flatter portion and a sharp increase in the price level across the steep portion.