Adam Smith taught that individual buyers and sellers who act in their own self-interest frequently promote society's interest. What assumption is needed for society's interest to be promoted?
A. Buyers and sellers can make informed decisions.
B. Markets are perfectly competitive.
C. There are no external benefits or costs.
D. All of these
Answer: D
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According to Robert Solow, the production function should be written as
A) Y = F(K, L, A). B) Y = F(K, L). C) Y = F(A, L). D) Y = F(K, A).
A horizontal merger between two firms occurs when:
a. the products of the merging firms were not related in any manner before the merger. b. one firm is a producer of products, and the other firm is a producer of services. c. one firm is a domestic firm, and the other is a foreign company. d. the firms stood in a buyer-seller relationship before the merger. e. the merger partners were competitors.
Contractionary fiscal policy in the United States reduces domestic income, prices, and interest rates, so the exchange rate will decrease.
Answer the following statement true (T) or false (F)
What circumstances favor nonneutral taxes?
A. only the presence of other distortionary taxes B. both inelastic demand and the presence of externalities C. only the presence of externalities D. both the presences of externalities and other distorting taxes