When negative externalities exist, the private market equilibrium represents a
A. market price which is too high and a market quantity which is too high.
B. market price which is too high and a market quantity which is too low.
C. market price which is too low and a market quantity which is too high.
D. market price which is too low and a market quantity which is too low.
Answer: C
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Refer to Figure 3.5. Answer the following questions about the game represented in the figure:
a. What type of game is represented by the payoff matrix? b. Does Donald have a dominant strategy, and if so, what is it? c. Does Donald have a dominant strategy, and if so, what is it? d. What is the cooperative solution? e. What is the Nash equilibrium?
How are sunk costs and fixed costs related?
A) In the long run they are equal to each other. B) In the short run they are equal to each other. C) They are not related in any way. D) Sunk costs cannot be recovered and fixed costs can be avoided by shutting down.
Sarah gets a salary increase of 20 percent. Before her raise, she purchased 5 pounds of hamburger and 1 pound of beef stew a month. After her raise, she consumes 2 pounds of hamburger and 3 pounds of beef stew a month. If everything else is held constant, we know that
A) hamburger is an inferior good and beef stew is a normal good for Sarah. B) hamburger is a normal good and beef stew is an inferior good for Sarah. C) both hamburger and beef stew are normal goods for Sarah. D) both hamburger and beef stew are inferior goods for Sarah.
The federal bank of Plutonia raises the discount rate from 4 percent to 5 percent. Which of the following is likely to be a consequence of such an action? a. Banks will lend aggressively, increasing the money supply in the economy
b. Banks will reduce the amount of loans, reducing the money supply in the economy. c. Banks will increase the amount of loans, reducing the money supply in the economy. d. Banks will lend aggressively, reducing the money supply in the economy.