If the demand for cigarettes is highly inelastic, this indicates that:
A. higher cigarette prices will increase the demand for cigarettes.
B. the price elasticity coefficient of cigarettes exceeds 1.
C. the price elasticity coefficient of cigarettes equals 1.
D. the quantity of cigarettes purchased by consumers is not very responsive to a change in the price of cigarettes.
Answer: D
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If one economic agent possesses more information than their fellow transactor ________
A) economic transactions cannot occur B) the moral hazard problem has been eliminated C) the adverse section problem has been eliminated D) asymmetric information exists
Which of the following statements about private and social costs associated with a negative externality is TRUE?
A) Social costs include externalities. B) Private cost do not include externalities. C) Social costs are never smaller than private costs. D) All of the above.
A plant uses machinery and waste water to produce steel. The owner of the plant wants to maintain an output of 10,000 tons a day, even though the government has just imposed a $100 per gallon tax on using waste water
The reduction in the amount of waste water that results from the imposition of this tax depends on A) the amount of waste water used before the tax was imposed. B) the cost to the firm of using waste water before the tax was put in place. C) the rental rate of machinery. D) the marginal product of waste water only. E) the ratio of the marginal product of waste water to the marginal product of machinery.
Which of the following is a primary function served by financial markets?
a. creating new products and product lines b. facilitating large-scale production methods c. encouraging laborers to unionize d. implementing new production techniques e. discovering new markets for existing products