If a regulatory agency mandates that a natural monopoly charge a price equal to its average cost:
A. the firm will eventually exit the industry.
B. the firm will earn economic profits greater than zero.
C. other firms will find it profitable to enter this industry.
D. the firm will earn economic profits equal to zero.
Answer: D
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If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should
A) split her time evenly between being a lawyer and a word processor. B) specialize in being a word processor because it is more capital-intensive. C) specialize in being a lawyer because its opportunity cost is lower. D) should pursue the activity she enjoys more.
Why should an economy specialize and trade according to its marginal cost advantage or comparative advantage?
Refer to the information provided in Figure 2.4 below to answer the question(s) that follow.
Figure 2.4According to Figure 2.4, Point E necessarily represents
A. only motorcycles being produced. B. overallocation of resources. C. an impossible production point. D. technological advancement.
All but which of the following could be adjusted as a means of deflating asset price bubbles:
A. tariffs B. capital surcharges C. capital requirements D. fees for insuring the capital of banks