Refer to the figure below.________ inflation will eventually move the economy pictured in the diagram from short-run equilibrium at point ________ to long-run equilibrium at point ________, 
A. Rising; B; C
B. Falling; A; C
C. Falling; A; B
D. Rising; A; C
Answer: D
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Pollution is a cost because it entails the sacrifice of valued opportunities
A) and because the process of creating it confers no benefits on the members of society. B) for some people. C) and reduces the net welfare of society. D) which makes everyone worse off in the long run.
The bundling of mortgages together and the issuing of securities for their financing made it possible for investment banks to
a. reduce their exposure to risk in the event that the overall mortgage default rate rose. b. reduce the amount of capital required to back these bundled securities. c. build up large reserves so they would be able to meet their obligations even if the mortgage default rate rose substantially. d. quickly access funds to meet short-term debt obligations.
Insurance works best in situations where:
a. there is a high probability of a large loss. b. the level of probability and the size of the loss are irrelevant. c. there is a high probability of a small loss. d. there is a low probability of a small loss. e. there is a low probability of a large loss.
Governments that impose sin taxes on goods they believe are harmful to the consumer may not take into account deadweight loss because:
A. producer surplus increases when sin taxes are instituted. B. individuals are self-interest-seeking rational beings. C. the consumer surplus that is lost may not reflect the consumer's welfare. D. the demand curve reflects individuals' desire but not their ability to purchase.