The nation of Loneland does not allow international trade. In Loneland, you can buy 1 pound of beef for 2 pounds of cheese. In neighboring countries, you can buy 2 pounds of beef for 3 pounds of cheese. If Loneland were to allow free trade, it would export cheese
a. True
b. False
Indicate whether the statement is true or false
True
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Say’s Law implies that
a. production generates income, which is all spent to purchase what was produced. b. demand creates its own supply. c. markets do not clear. d. demand determines real output.
Assume that in a monopolistically competitive industry, firms are earning economic profit. This situation will:
A. cause firms to standardize their product to limit the degree of competition. B. make the industry allocatively efficient as each firm seeks to maintain its profits. C. attract other firms to enter the industry since the barriers to entry are low. D. reduce the excess capacity in the industry as firms expand production.
When there is an external cost, the unregulated market
A. minimizes public welfare. B. overproduces the good or service. C. underproduces the good or service. D. reaches the most efficient solution.
What are the potential problems that can result if central bankers set a target of a zero rate of inflation?
What will be an ideal response?