Suppose two firms produce close substitutes such that reducing the price of one product reduces the quantity demanded of the other. If those two firms merge:
A. they can earn higher profits by continuing to sell both products if the profit gained from increased sales of one product are greater than the lost profits from reduced sales of the other product.
B. they will eliminate the less profitable product and sell only one.
C. they will raise prices on both products.
D. they will be unable to earn higher profits because the two products will compete against each other.
Answer: A
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Your opportunity cost of attending a lecture on the number of brain cells lost by binge-watching episodes of Here Comes Honey Boo Boo is
A) zero, since you already know that binge-watching will kill all of your brain cells. B) the price of the ticket for the lecture. C) the value of attending a meditation class, which is your next-best alternative. D) the total value of all other options you could have chosen instead of going to the lecture.
The proposition that if private parties can bargain without cost over the allocation of resources, they can solve the problem of externalities on their own, is called
a. the Pigovian theorem. b. a corrective tax. c. the externality theorem. d. the Coase theorem.
When a society is more equal:
A. the more the economy grows, so the best economy is the most equal. B. economic growth will provide the most resources for its disadvantaged members. C. the more everyone gains when the economy improves, but that doesn't mean the most equal society is the best society. D. economic growth will create imbalance, and the government will need to work to equalize incomes.
What did the high-growth Asian economies do to share wealth across all levels of society?
What will be an ideal response?