Sofia, a political science student, thinks that the government should intervene to revive declining industries like video rentals and print newspapers
The government, she reasons, can resolve the coordination problem of getting the agents in these markets to trade. Do you agree with her? Explain your answer.
Sofia's reasoning is flawed because declining industries do not face a coordination problem. A coordination problem results when economic agents with coinciding interests cannot be brought together to trade. However, in this case, falling demand is responsible for the decline of industries like video rentals and print newspapers. Even if the government attempted to bring together economic agents in these industries, it is unlikely that demand for rented videos and newspapers will increase.
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Why is the marginal benefit of cleaning up pollution downward sloping?
A. The benefit can only be seen if you clean large amounts of pollution so there is little marginal benefit otherwise. B. At first cleaning pollution makes a big difference but there are diminishing marginal returns for subsequent efforts. C. At first you see small effects to cleaning but then see larger differences because of diminishing marginal returns. D. Cleaning up pollution continues to cost the citizens in the area more and more.
Between 2003 and 2008, the actual federal funds rate
A) tended to be lower than the rates predicted by the Taylor rule. B) tended to higher than the rates predicted by the Taylor rule. C) followed closely the rates predicted by the Taylor rule. D) moved in directions opposite to the rates predicted by the Taylor rule.
Historically, technology has:
A. worsened and the demand for labor has increased as output has decreased. B. improved and the demand for labor has decreased as output has increased. C. worsened and the demand for labor has decreased as output has decreased. D. improved and the demand for labor has increased as output has increased.
Real GDP is a more accurate measure of economic growth than nominal GDP because:
a) Nominal GDP can increase due to an increase in production or prices or both. b) Nominal GDP is a total dollar measurement. c) Nominal GDP only increases because of an increase in production. d) Real GDP is a measurement of the overall price level.