All of the following are functions of the Federal Reserve System EXCEPT
A. to supply the economy with fiduciary currency.
B. to act as the government's fiscal agent.
C. to provide loans to developing countries.
D. to hold depository institutions' reserves.
Answer: C
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How does the social problem of positive externalities differ from the problem created by negative externalities?
A) Positive externalities can create free-rider problems; negative externalities do not. B) Positive externalities are created by altruistic people; negative externalities are not. C) Negative externalities can create free-rider problems; positive externalities do not. D) Negative externalities are created by selfish people; positive externalities are not. E) Trick question: neither positive nor negative externalities create a social problem.
The concave shape of a production possibilities frontier showing possible output levels of good A and good B indicates that if the economy produces more and more of good B,
a. larger and larger amounts of good A must be sacrificed b. smaller and smaller amounts of good A must be sacrificed c. more of good A will be produced d. the amount of resources available in the economy must be increased e. there must be an improvement in technology
Consumer surplus
a. is the difference between total willingness to pay and the total amount actually paid. b. guarantees that the market value of a good in money is equal to the total economic value of the good. c. is always negative because of diminishing marginal utility. d. is the total area under a consumer's demand curve.
Tobacco production is one of the more heavily subsidized industries in the United States. Suppose that as a result of intense lobbying from health-related concerns, Congress repeals the tobacco firms' subsidies. Which of the following scenarios would likely occur?
A) The tobacco firms' supply curve would shift rightward, as it would now be cheaper to produce each level of output. B) The tobacco firms' supply curve would shift leftward, since it would now cost more to produce each level of output. C) The tobacco firms would not experience any shift in their supply curves; subsidies don't affect output. D) There would be a movement along the supply curve for tobacco, but the supply curve would not shift.