Normative economic analysis involves
A. value judgments.
B. positive analysis.
C. if-then statements.
D. objective descriptions of the way things are.
Answer: A
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If a market is productively efficient,
a. the output is being produced at the lowest possible resource cost b. the output is selling for the lowest possible price c. economic profit in the market is positive d. the output being produced is what consumers want e. no firm can earn a normal profit
Asymmetric information generally leads to efficient resource allocation
a. True b. False Indicate whether the statement is true or false
In corporations, a principal-agent problem can arise when
a. the shareholders are the principal and the managers are the agent. b. the board of directors is the principal and the managers are the agent. c. the shareholders are the principal and the board of directors is the agent. d. All of the above are correct.
Refer to the accompanying figure, which shows the annual domestic supply and annual domestic demand for jeans in a small country.
Suppose this country initially does not trade with the rest of the world. If the world price of a pair of jeans is $40, and this country opens itself to trade, then the annual domestic production of jeans will:
A. increase from 20,000 to 28,000. B. fall from 20,000 to 4,000. C. fall from 28,000 to 4,000. D. increase from 4,000 to 28,000.