In the tourist-trap model, a consumer might pay more than the marginal cost for a good sold in a competitive market because
A) the consumer is not free to search for lower prices.
B) souvenir stores are part of a nationwide cartel.
C) the cost of searching for a cheaper good is more than the markup over the marginal cost.
D) the difference in prices between stores will be smaller than the search cost.
C
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In the above figure, what happens to the firm's optimal level of output if the price it receives for its product decreases from P4 to P3?
A) Output stays the same. B) Output decreases. C) Output increases. D) There is not enough information provided to know what happens to output.
When analyzing the impact of a budget deficit, an economist will focus on
A. strictly the ratio of the deficit to GDP (it doesn't matter what is purchased with the borrowed money). B. strictly the amount borrowed. C. strictly the inflation-adjusted amount borrowed. D. the ratio of the deficit to GDP and whether what is purchased with the borrowed money can be considered an investment.
Answer the following questions true (T) or false (F)
1. Long lags associated with the legislative process in implementing fiscal policy make it more difficult to use than monetary policy. 2. The budget deficit increases during wars and recessions. 3. Increasing the federal budget deficit will contribute to increasing the federal government debt.
Assuming there is no government or foreign sector, the formula for the multiplier is
A. 1 - MPC. B. 1/(1 + MPC). C. 1/(1 - MPC). D. 1/MPC.