A market failure occurs when:
a. the market outcome is viewed as unfair by a majority of consumers.
b. a market fails to provide the good at a zero price.
c. quantity demanded exceeds quantity supplied.
d. the market outcome is not the socially efficient outcome.
e. prices are determined by the interaction of the forces of demand and supply and not through central planning.
d
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Find the real exchange rate for the following case: Assume that the representative basket of European goods costs 100 euros and the representative U.S. basket costs $125,
and the dollar/euro exchange rate is $0.75 per euro, then the price of the European basket in terms of U.S. basket is:
Alpha can produce either 18 tons of oranges or 9 tons of apples in a year, while Omega can produce either 16 tons of oranges or 4 tons of apples. Which of the following exchange rates between apples and oranges would allow both Alpha and Omega to gain by specialization and exchange?
a. 1 ton of oranges for 1/3 of a ton of oranges b. 1 ton of apples for 3 1/3 tons of oranges c. 1 ton of apples for 2 tons of oranges d. 1 ton of oranges for 0.4 tons of apples
If the federal government wishes to move the economy out of a recessionary gap, the appropriate fiscal policy is a(n)
A. increase in taxes. B. decrease in government purchases. C. decrease in transfer payments. D. None of the above is correct.
In the long run when a perfectly competitive firm experiences positive economic profits
A. firms exit the industry, the market supply curve shifts leftward, and the market price rises. B. firms enter the industry, the market supply curve shifts rightward, and the market price falls. C. firms exit the industry, the market supply curve shifts rightward, and the market price falls. D. firms enter the industry, the market supply curve shifts rightward, and the market price rises.