Consider a used car market in which half the cars are good and half are bad (lemons). If buyers are rational, the prices being offered for used cars will result in
A) an equal proportion of a good cars and lemons being sold in an efficient market.
B) a larger proportion of good cars being sold and consequently, consumer surplus is increased.
C) a larger proportion of lemons being sold and consequently, producer surplus is increased.
D) an equal proportion of good cars and lemons being sold in an inefficient market.
Answer: C
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The U.S. economy remains subject to frequent boom and bust cycles. Throughout U.S. history, policymakers after the Great Depression often
(a) raise or lower taxes and spending to adjust aggregate demand and thereby smooth the business cycle. (b) take a hands-off approach to the business cycle. (c) consult with world organizations on how to address cyclic fluctuations. (d) close economies to international trade.
In the short run, firms in monopolistically competitive markets
A. produce the output level where marginal revenue equals marginal cost. B. can earn economic profits. C. face a downward-sloping demand curve. D. All of these responses are correct.
A country that exports more than it imports will:
A. have a current account deficit and a capital account surplus. B. have a current account deficit and a capital account deficit. C. have a current account surplus and a capital account deficit. D. have a current account surplus and a capital account surplus.
Recall the Application about productivity in the nation of Latvia in the 1990s to answer the following question(s). According to this Application, workers in the European Community were more productive than workers in Latvia in the 1990s, yet the European Community still purchased products from Latvia. This is because Latvia ________ in the production of the products it sold to the European Community.
A. had an absolute advantage B. had a comparative advantage C. used fewer resources D. had a higher opportunity cost