When market failures occur
A) the invisible hand will correct for the market failures.
B) the price system will correct the market failures.
C) buyers and sellers will correct the market failures.
D) the government can step in to correct the market failures.
Answer: D
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The average price of gasoline in your neighborhood is $2.15 per gallon
Your neighbor, Diana tells you that you can "save a lot" by frequenting a gas station 20 miles outside your neighborhood where the price of gasoline is $2.06 per gallon However, she cautions you that there are usually long lines at that station. Is her suggestion beneficial to you? A) No, my friend is misled; clearly, the lower-priced gasoline must be of inferior quality and could damage vehicles. B) No, if one factors in the non-monetary opportunity costs (driving time and waiting in line), it could prove more costly to go to the lower-priced gasoline station. C) Yes, the lower price of gasoline at the rival station increases my purchasing power and enables me to consume more of other goods. D) Yes, since gasoline is a necessity for car owners, the total cost savings would be relatively substantial.
Suppose that, given the same number of workers, the United States can produce two times as many TVs or 20 times as many potatoes as Chile. Which of the following statements is true?
A. Chile should trade with the United States for potatoes because the United States has an absolute advantage in the production of potatoes. B. Chile should trade with the United States for TVs because the United States has an absolute advantage in the production of potatoes. C. The United States can benefit from trading TVs but not potatoes with Chile. D. The United States has absolute advantage in producing both goods.
In the short run, monopolistically competitive firms:
A. can earn positive economic profits by acting like a monopolist. B. will earn zero economic profits by acting like a monopolist. C. can earn positive economic profits by acting like a perfectly competitive firm. D. will earn zero economic profits by acting like a perfectly competitive firm.
In the Great Recession of 2007-2009, the stock market values shrank, causing a reverse:
A. Wealth effect
B. Real-balances effect
C. Interest-rate effect
D. Expectations effect