Suppose the government currently places tariffs and/or other import restrictions on good X. Will imposing a tariff and/or trade restriction on good Y necessarily reduce overall social welfare for the economy? What will be an ideal response? ANSWER No, this follows from the contrapositive of the Theory of the Second Best. If removing one […]
A sale in which property or a service is sold to the highest bidder is called a(n) A) auction. B) bidder sale. C) competitive market. D) Austrian bundle. ANSWER A
In Spain, people are considered organ donors unless they explicitly indicate they do not want to be. In the United States, people are only considered organ donors if they explicitly indicate they wish to be. Behavioral economics would suggest that A) everything else equal, the opt-in system of Spain would generate more organ donors. as […]
Group price discrimination has ________ consumer surplus than under ________. A) more; perfect competition B) less; perfect competition C) more; an elastic demand curve D) less; single-price monopoly ANSWER B
Many companies monitor their employees’ Internet use and email. Why might they be doing this? A) Because they like to spy. B) In order to improve morale. C) To gain inside information on new consumer trends. D) To reduce shirking. ANSWER D
In long-run equilibrium a perfectly competitive firm will operate where the price is A) greater than MR but equal to MC and minimum ATC. B) greater than MR and MC, but equal to minimum ATC. C) greater than MC and minimum ATC, but equal to MR. D) equal to MR, MC and minimum to ATC. […]
The above figure shows Bobby’s indifference map for juice and snacks. Also shown are three budget lines resulting from different prices for snacks. As the price of snacks rises, the price for juice A) stays the same. B) increases. C) decreases D) might change, but there is not enough information to determine. ANSWER A […]
Your friend Dimitre tells you that he thinks that his favorite basketball team has a 70% chance of winning the next game. This is an example of A) an objective probability. B) a subjective probability. C) a risk-averse statement. D) Friedman-Savage preferences. ANSWER B
Suppose the production possibilities for two countries, producing either food or clothing, are shown in the above figure. They can each produce any linear combination as well. Once free trade is allowed, Canada will produce A) no clothing. B) 10 units of clothing. C) 20 units of clothing. D) 5 units of clothing. ANSWER […]
The above figure shows the payoff to two airlines, A and B, of serving a particular route. If the two airlines must decide simultaneously, and the government imposes a $20 per firm tax on firms that service this route, which of the following maximizes the firms’ joint profits? A) Neither firm services the route. B) […]
