The only way to avoid the free rider problem is to allow the government to provide a public good
a. True
b. False
Indicate whether the statement is true or false
False
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A market is considered competitive if the Herfindahl-Hirschman Index (HHI) is ________ and its four-firm concentration ratio is ________
A) high; high B) high; low C) low; high D) low; low E) between 30 percent and 70 percent; greater than 5,000
Assume the economy is in recession and real GDP is below full employment. The marginal propensity to consume (MPC) is 0.90, and the government follows Keynesian economics by using expansionary fiscal policy to increase aggregate demand (total spending). If an increase of $1,000 billion aggregate demand can restore full employment, the government should:
a. increase spending by $100 billion. b. decrease spending by $790 billion. c. increase spending by $1,000 billion. d. increase spending by $250 billion.
Oligopoly firms: a. usually act as if they were a monopoly producer
b. generally charge a price for goods and services equal to marginal cost. c. base their pricing and output decisions on the likely responses of rival firms. d. are isolated from competition by low barriers to entry.
Assume that one firm in a perfectly competitive market adopts a technological innovation that enables it to produce at a lower cost per unit than competing firms in the short run. Which of the following statements is correct?
a. The innovating firm will earn above-normal profit in the long run. b. All the competing firms will be forced to exit the market in the long run. c. This is an example of a decreasing cost industry. d. Competing firms will need to adopt the new technology in the long run in order to survive. e. Only new firms entering the industry with new-technology plants will be able to compete with the innovating firm.