The market system:
A. produces considerable inefficiency in the use of scarce resources.
B. effectively harnesses the incentives of workers and entrepreneurs.
C. is not consistent with freedom of choice in the long run.
D. has slowly lost ground to emerging command systems.
Answer: B
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If a country has a comparative advantage in producing a product, it must also have an absolute advantage in producing that product
Indicate whether the statement is true or false
In constructing a production possibilities curve, all of the following are assumed EXCEPT
A) resources are fully employed. B) the quantity and quality of resources being used is fixed. C) the state of technology is improving. D) the time period involved is fixed.
Suppose that flu shots create a positive externality equal to $8 per shot. Further suppose that the government offers a $6-per-shot subsidy to producers. What is the relationship between the equilibrium quantity and the socially optimal quantity of flu shots produced?
a. They are equal. b. The equilibrium quantity is greater than the socially optimal quantity. c. The equilibrium quantity is less than the socially optimal quantity. d. There is not enough information to answer the question.
Using the AD-AS model, an increase in government expenditure...
a) has no impact on real GDP b) has no impact on real GDP, but will increase potential GDP c) increases both real and the price level d) has a full multiplier effect on real GDP, leaving the price level unchanged in the long run