When a positive externality exists in a market, total surplus:
A. is the same as a market without a negative externality.
B. is decreased by deadweight loss compared to that same market without a negative externality.
C. is the same but re-distributed differently than if that same market did not have a negative externality.
D. is increased by deadweight gain compared to that same market without a negative externality.
Answer: B
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Refer to Figure 15-14. In the figure above, suppose the economy in Year 1 is at point A and is expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C?
A) increase the required-reserve ratio B) sell Treasury bills C) decrease income taxes D) buy Treasury bills
Three individuals have $1000 and identical preferences for gum, g, and cigarettes, s, as measured by the utility function U(g,s) = 10g0.9a0.1. The price of gum is $9 and the price of cigarettes is $12
What is the market surplus/shortage at a price of $12 when the supply of cigarettes is 5? A) There will be a shortage of 3 cigarettes. B) There will be a surplus of 3 cigarettes. C) There will be a shortage of 2/3 cigarettes. D) There will be a surplus of 2/3 cigarettes.
A direct implication of the special interest theory of government is that _____
a. political pressure from special interests pushes government to expand b. special interests get whatever they want c. special interests do not get what they want under Incrementalism d. the general public general can apply more pressure than special interests and thus will move the budget in drastic ways, depending upon public sentiment
Which of the following is NOT a function of the International Monetary Fund?
A) serve as lender of last resort for national governments B) administer an international foreign exchange system C) establish the SDR system nations utilize to settle international payment obligations D) establish and administer each nation's fiscal and monetary policies