Answer the following statement true (T) or false (F)

1) Allocative efficiency occurs where (for the last unit) maximum willingness to pay exceeds
minimum acceptable price by the greatest amount.
2) Allocative efficiency occurs where the collective sum of consumer and producer surplus is at a
maximum.
3) That government that has the smallest budget is the most efficient in the economic sense.
4) A demand curve for a public good is determined by summing horizontally the individual
demand curves for the public good.
5) The optimal quantity of a public good occurs where the marginal benefit of the citizen who has
the highest preference for the good just equals the good's marginal cost.


1) F
2) T
3) F
4) F
5) F

Economics

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Everything else the same, if government expenditure increases by $400 billion and imports increase by $400 billion, then GDP

A) increases by $400 billion. B) increases by $200 billion. C) decreases by $400 billion. D) does not change. E) decreases by $200 billion.

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The more substitutable capital and labor are in production, the more likely it is that the cross-price demand curve for capital (relative to the wage) is upward sloping.

Answer the following statement true (T) or false (F)

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The purpose of expansionary fiscal policy is to

a. increase output b. prevent hyperinflation c. slow the growth of the GDP d. increase the separation between government and private industry

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For ________ goods, market demand is the horizontal summation of individual demand curves and for ________ goods, market demand is the vertical summation of individual demand curves.

A. public; private B. nonexcludable; excludable C. private; public D. nonrival; rival

Economics