Which of the following is the most likely side effect of an increase in the relative size of the underground economy with the passage of time?
A. The growth rate of real GDP will tend to understate the growth rate of total output.
B. The growth rate of real GDP will tend to overstate the growth rate of total output.
C. The GDP deflator will tend to overstate any increase in inflation.
D. The GDP deflator will tend to understate any increase in inflation.
Answer: A
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Government ownership of property and resources in the United States is
A. about as common as it is in European countries. B. widespread; the United States is a leader in the amount of government ownership of resources. C. relatively rare; the United States is mostly privatized. D. rare but has been increasing rapidly as the United States catches up to other countries.
If the production of a product or service involves external or spillover benefits, then the government can improve efficiency in the market by:
A. imposing a corrective tax to correct for an overallocation of resources. B. providing a subsidy to correct for an underallocation of resources. C. imposing a corrective tax to correct for an underallocation of resources. D. providing a subsidy to correct for an overallocation of resources.
Tastes are starting to change for hybrid vehicles such that consumers are purchasing more hybrid vehicles and suppliers are choosing to produce more hybrid vehicles than they were five years ago. Due to the change in tastes, equilibrium price has fallen and equilibrium quantity has increased relative to the hybrid market from five years ago. What is the likely cause of this result?
A) Supply increased by more than demand. B) Demand increased by more than supply. C) Demand and supply increased by the same amount. D) Only supply increased.
Which of the following statements about implicit costs is true?
A. They measure the forgone opportunities of the firm's owners. B. They do not enter into the calculation of economic profit. C. They are always fixed. D. They exceed explicit costs.