Is a benevolent command economy likely to achieve greater efficiency than a purely competitive market system? Explain.
What will be an ideal response?
No. The market system, by itself, will tend to result in allocative efficiency, thus solving the economic coordination tasks of the economy automatically. A command system cannot improve upon the market; the best it could achieve is efficiency as great as the market. Because the motivation of self-interest in allocating resources in a command economy is not as keen, the result is likely to be far from efficient.
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Figure (a) represents the domestic demand and supply of televisions. Suppose free trade is allowed and the current world price of televisions is P1 as shown in Figure (b). Now suppose the domestic government imposes a tariff increasing the domestic price to P2 in Figure (b). This tariff will cause
a. imports to fall from Q2 minus Q1 to Q4 minus Q3.
b. domestic producers to increase their production from Q1 to Q3.
c. domestic consumers to reduce their consumption from Q2 to Q4.
d. All of the above.
GDP underestimates our economic well-being:
A. because it includes the value of work done by illegal immigrants. B. because it includes the value of work done by nannies. C. because it ignores leisure. D. because it includes the value of work done by householders.
In general demand curves slope _____ and supply curves slope _____.
A. downward to the right; downward to the right B. upward to the right; upward to the right C. downward to the right; upward to the right D. upward to the right; downward to the right
The portion of national debt owned by foreigners does constitute a burden on the nation as a whole.
Answer the following statement true (T) or false (F)