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- 2.
Rational people make decisions at the margin by
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Following marginal traditions.
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Behaving in a random fashion.
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Thinking in black-and-white terms
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Comparing marginal costs and marginal benefits
Correct Answer
A. Comparing marginal costs and marginal benefitsExplanation
Rational people make decisions at the margin by comparing marginal costs and marginal benefits. This means that they consider the additional costs and benefits of a decision and weigh them against each other. By doing so, they can determine whether the benefits outweigh the costs or vice versa. This approach allows rational individuals to make informed decisions based on the incremental changes in costs and benefits, rather than relying on random behavior or thinking in absolutes.Rate this question:
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- 3.
One effect of the government-imposed seat belt law in the U.S. has been
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A dramatic decrease in the number of pedestrian deaths.
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Safer driving.
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An increase in the number of accidents.
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A dramatic decrease in the number of driver deaths.
Correct Answer
A. An increase in the number of accidents. -
- 4.
Low rates of inflation are generally associated with
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Low rates of government spending.
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Small or nonexistent government budget deficits.
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Low rates of productivity growth.
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Low rates of growth of the quantity of money.
Correct Answer
A. Low rates of growth of the quantity of money.Explanation
Low rates of inflation are generally associated with low rates of growth of the quantity of money. This is because when the quantity of money in an economy increases at a slower pace, there is less money available to be spent, which can help to keep prices stable. If the quantity of money grows too quickly, it can lead to an excess of money chasing the same amount of goods and services, causing inflation. Therefore, when the growth of the quantity of money is low, it helps to keep inflation rates low as well.Rate this question:
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- 5.
The Council of Economic Advisers
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Was created in 1946.
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Advises the president of the United States on economic policy matters
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Writes the annual Economic Report of the President.
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All of the above are correct.
Correct Answer
A. All of the above are correct.Explanation
The Council of Economic Advisers was established in 1946 and its primary role is to provide advice to the president of the United States on economic policy matters. Additionally, the council is responsible for writing the annual Economic Report of the President. Therefore, all of the given statements are correct.Rate this question:
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- 6.
When economists are trying to explain the world, they are
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Scientists.
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Policy advisers.
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In the realm of microeconomics rather than macroeconomics.
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In the realm of normative economics rather than positive economics.
Correct Answer
A. Scientists.Explanation
Economists are considered scientists because they use scientific methods and tools to study and understand the behavior of individuals, firms, and markets. They collect data, analyze it, and develop theories and models to explain economic phenomena. By applying the scientific method, economists aim to provide objective and evidence-based explanations for economic issues. While economists may also serve as policy advisers, their primary role is to conduct scientific research and contribute to the body of economic knowledge. This answer highlights the scientific nature of economics and the methodology economists employ in their work.Rate this question:
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- 7.
Graphs such as bar graphs are limited in that they
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Can only show variables that are positively related.
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Can only show variables that have a negative correlation.
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Provide information on only one variable.
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Provide information on no more than two variables.
Correct Answer
A. Provide information on only one variable.Explanation
Bar graphs are a type of graph that display categorical data using rectangular bars. They are limited in that they can only provide information on one variable. This means that a bar graph can only represent and compare data for a single category or variable, such as the frequency or quantity of a specific item or event. It does not show any relationship or correlation between different variables, nor can it display multiple variables simultaneously.Rate this question:
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- 8.
The fact that economists are generally united in their support of free trade is traceable to
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The principle of absolute advantage.
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The arguments made by Adam Smith and David Ricardo.
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The decline in the power of labor unions during the 20th century.
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All of the above are correct.
Correct Answer
A. The arguments made by Adam Smith and David Ricardo.Explanation
The correct answer is "the arguments made by Adam Smith and David Ricardo." Economists generally support free trade because of the principles put forth by Adam Smith and David Ricardo. Adam Smith argued for the benefits of specialization and division of labor, while David Ricardo introduced the concept of comparative advantage, which suggests that countries should specialize in producing goods and services in which they have a lower opportunity cost. These arguments highlight the advantages of free trade and the potential for increased efficiency and economic growth.Rate this question:
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- 9.
The discovery of a new hybrid wheat would increase the supply of wheat. As a result, wheat farmers would realize an increase in total revenue if
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The supply of wheat is elastic.
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The supply of wheat is inelastic.
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The demand for wheat is inelastic.
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The demand for wheat is elastic.
Correct Answer
A. The demand for wheat is elastic.Explanation
If the demand for wheat is elastic, it means that a change in price will have a significant impact on the quantity demanded. Therefore, when a new hybrid wheat is discovered and the supply increases, the price of wheat will decrease. This will lead to a proportionately larger increase in the quantity demanded, resulting in an increase in total revenue for wheat farmers.Rate this question:
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- 10.
Policymakers use taxes
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To raise revenue for public purposes, but not to influence market outcomes.
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Both to raise revenue for public purposes and to influence market outcomes.
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When they realize that price controls alone are insufficient to correct market inequities.
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Only in those markets in which the burden of the tax falls clearly on the sellers.
Correct Answer
A. Both to raise revenue for public purposes and to influence market outcomes.Explanation
Policymakers use taxes both to raise revenue for public purposes and to influence market outcomes. Taxes are a way for the government to generate funds that can be used for public services and infrastructure. Additionally, taxes can be used as a tool to influence market behavior and correct market inequities. For example, policymakers may implement taxes on goods with negative externalities, such as cigarettes or carbon emissions, to discourage their consumption and promote healthier or more sustainable alternatives. Taxes can also be used to redistribute wealth and reduce income inequality.Rate this question:
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- 11.
Efficiency means that
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Society is conserving resources in order to save them for the future.
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Society's goods and services are distributed equally among society's members.
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Society's goods and services are distributed fairly, though not necessarily equally, among society's members.
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Society is getting the maximum benefits from its scarce resources.
Correct Answer
A. Society is getting the maximum benefits from its scarce resources.Explanation
Efficiency means that society is getting the maximum benefits from its scarce resources. This implies that resources are being used in the most productive and effective way possible, resulting in the greatest overall benefit for society. By maximizing the use of limited resources, efficiency ensures that society can meet its needs and desires while minimizing waste and inefficiency. This allows for sustainable development and the ability to preserve resources for future generations.Rate this question:
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- 12.
An example of an externality is the impact of
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Bad weather on the income of farmers.
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The personal income tax on a person's ability to purchase goods and services.
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Pollution from a factory on the health of people in the vicinity of the factory.
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Increases in health care costs on the health of individuals in society.
Correct Answer
A. Pollution from a factory on the health of people in the vicinity of the factory.Explanation
An example of an externality is pollution from a factory on the health of people in the vicinity of the factory. This is because pollution is a negative externality that affects individuals who are not directly involved in the production or consumption of the factory's goods. The pollution can lead to health issues for the people living nearby, impacting their well-being and quality of life. This externality highlights the need for regulations and measures to address the negative consequences of industrial activities on the surrounding environment and communities.Rate this question:
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- 13.
Almost all economists agree that rent control
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Has no effect on the rental income of landlords.
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Allows the market for housing to work more efficiently.
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Adversely affects the availability and quality of housing.
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Is a very inexpensive way to help the most needy members of society.
Correct Answer
A. Adversely affects the availability and quality of housing.Explanation
Rent control refers to government regulations that limit the amount landlords can charge for rent. The given correct answer states that rent control adversely affects the availability and quality of housing. This is because when rent is artificially kept low, it reduces the incentive for landlords to maintain or improve their properties. As a result, the supply of quality housing decreases over time, leading to a decrease in availability. Additionally, rent control can create a black market for housing, as landlords may choose to rent units illegally at market rates. Overall, rent control has been found to have negative impacts on the housing market.Rate this question:
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- 14.
When a monopolist is able to sell its product at different prices, it is engaging in
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Distribution pricing.
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Quality-adjusted pricing.
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Price differentiation.
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Price discrimination.
Correct Answer
A. Price discrimination.Explanation
Price discrimination occurs when a monopolist sells its product at different prices to different customers or groups of customers. This strategy allows the monopolist to maximize its profits by charging higher prices to customers who are willing to pay more and lower prices to customers who are more price-sensitive. By segmenting the market and charging different prices based on factors such as location, age, or willingness to pay, the monopolist can extract more consumer surplus and increase its overall revenue. This practice is considered a form of market power and can be seen as unfair or anti-competitive.Rate this question:
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- 15.
A monopolist that practices perfect price discrimination
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Creates no deadweight loss.
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Charges one group of buyers a higher price than another group, such as offering a student discount.
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Produces the same monopoly level of output as when a single price is charged.
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Charges some customers a price below marginal cost because costs are covered by the high-priced buyers.
Correct Answer
A. Creates no deadweight loss.Explanation
A monopolist that practices perfect price discrimination creates no deadweight loss because it is able to extract the maximum possible consumer surplus by charging each buyer their individual willingness to pay. This means that the monopolist is able to capture all the surplus that would have been lost under other pricing strategies. As a result, there is no inefficiency or loss of economic welfare in the form of deadweight loss.Rate this question:
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- 16.
The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as
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Price segregation.
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Price discrimination.
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Arbitrage.
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Monopoly pricing.
Correct Answer
A. Price discrimination.Explanation
Price discrimination refers to the practice of selling the same goods or services to different customers at different prices, even though the marginal cost of producing those goods or services remains the same. This strategy is often used by businesses to maximize their profits by charging higher prices to customers who are willing to pay more, while offering lower prices to customers who are more price-sensitive. Price segregation, arbitrage, and monopoly pricing are not accurate terms to describe this practice.Rate this question:
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- 17.
The field of economics is divided into two subfields: microeconomics and macroeconomics.
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True
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False
Correct Answer
A. TrueExplanation
The statement is true because economics is indeed divided into two subfields: microeconomics and macroeconomics. Microeconomics focuses on individual economic agents such as households and firms, analyzing their behavior and decision-making processes. On the other hand, macroeconomics studies the economy as a whole, examining broad aggregates such as national income, unemployment, inflation, and economic growth. These two subfields provide different perspectives and tools to understand and analyze different aspects of the economy.Rate this question:
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- 18.
Most economists are in favor of price controls as a way of allocating resources in the economy.
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True
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False
Correct Answer
A. FalseExplanation
Most economists are not in favor of price controls as a way of allocating resources in the economy. Price controls can lead to market distortions, inefficiencies, and unintended consequences. Instead, economists generally advocate for market-based mechanisms, such as supply and demand, to determine prices and allocate resources efficiently. Price controls are often seen as a short-term solution that can have negative long-term effects on the economy.Rate this question:
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- 19.
In a market, the price of any good adjusts until quantity demanded equals quantity supplied.
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True
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False
Correct Answer
A. TrueExplanation
The statement is true because in a market, the price of a good is determined by the interaction of demand and supply. When the price is too high, the quantity demanded decreases, and when the price is too low, the quantity demanded increases. Similarly, when the price is too low, the quantity supplied decreases, and when the price is too high, the quantity supplied increases. The market reaches equilibrium when the quantity demanded equals the quantity supplied, and at this point, the price of the good has adjusted to this equilibrium level.Rate this question:
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- 20.
A firm will shut down in the short run if revenue is not sufficient to cover its variable costs of production.
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True
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False
Correct Answer
A. TrueExplanation
If a firm's revenue is not enough to cover its variable costs of production, it means that the firm is not generating enough income to cover the costs directly related to producing goods or services. In the short run, a firm cannot adjust its fixed costs, so if it cannot cover its variable costs, it will not be able to cover its total costs. In this situation, it is more cost-effective for the firm to shut down operations rather than continue to operate at a loss. Therefore, the statement is true.Rate this question:
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- 21.
Average total cost reveals how much total cost will change as the firm alters its level of production.
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True
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False
Correct Answer
A. FalseExplanation
Average total cost does not reveal how much total cost will change as the firm alters its level of production. Average total cost is calculated by dividing total cost by the quantity of output. It represents the cost per unit of output. However, it does not provide information about how total cost will change with changes in production. To understand how total cost will change, one would need to analyze the relationship between total cost and the level of production, which is captured by the concept of marginal cost.Rate this question:
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- 22.
Some companies merge in order to lower costs through efficient joint production.
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True
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False
Correct Answer
A. TrueExplanation
Companies often merge in order to lower costs through efficient joint production. By combining their resources, expertise, and production capabilities, companies can eliminate duplication, reduce overhead costs, and benefit from economies of scale. This allows them to streamline operations, increase efficiency, and ultimately lower costs. Merging also enables companies to pool their resources and invest in new technologies or research and development, further driving cost savings. Overall, merging can be a strategic move to optimize production processes and achieve cost efficiencies.Rate this question:
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- 23.
When economic profits are zero in equilibrium, the firm's revenue must be sufficient to cover all opportunity costs.
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True
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False
Correct Answer
A. TrueExplanation
When economic profits are zero in equilibrium, it means that the firm is earning enough revenue to cover all its costs, including both explicit costs (such as wages and rent) and implicit costs (such as the opportunity cost of the owner's time and capital). This implies that the firm is not making any excess profit, but it is still able to cover all its costs, ensuring that there is no economic loss. Therefore, the statement is true.Rate this question:
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- 24.
Fixed costs are incurred even when a firm does not produce anything.
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True
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False
Correct Answer
A. TrueExplanation
Fixed costs are expenses that do not change regardless of the level of production. These costs are incurred regularly and must be paid regardless of whether or not the firm produces anything. Examples of fixed costs include rent, insurance, and salaries. Therefore, it is true that fixed costs are incurred even when a firm does not produce anything.Rate this question:
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- 25.
A buyer is willing to buy a product at a price greater than or equal to his willingness to pay, but would refuse to buy a product at a price less than his willingness to pay.
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True
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False
Correct Answer
A. FalseExplanation
This statement is false because a buyer's willingness to pay represents the maximum price they are willing to pay for a product. Therefore, they would refuse to buy a product at a price greater than their willingness to pay, not less.Rate this question:
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- 26.
The income elasticity of demand is defined as the percentage change in quantity demanded divided by the percentage change in income.
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True
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False
Correct Answer
A. TrueExplanation
The statement is true because the income elasticity of demand measures the responsiveness of quantity demanded to changes in income. It is calculated by dividing the percentage change in quantity demanded by the percentage change in income. This elasticity helps to determine whether a good is a normal good (positive income elasticity) or an inferior good (negative income elasticity).Rate this question:
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- 27.
When market price increases, producer surplus increases because (1) producer surplus received by existing sellers increases, and (2) new sellers enter the market.
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True
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False
Correct Answer
A. TrueExplanation
When the market price increases, the producer surplus increases because existing sellers are able to sell their goods at a higher price, resulting in higher profits. Additionally, the higher price attracts new sellers to enter the market, increasing competition and potentially leading to even higher producer surplus. Therefore, both factors contribute to an increase in producer surplus when the market price increases.Rate this question:
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- 28.
Efficiency is related to the size of the economic pie, whereas equity is related to how the pie gets sliced and distributed.
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True
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False
Correct Answer
A. TrueExplanation
Efficiency refers to the overall productivity and effectiveness of an economy, while equity focuses on the fairness and equality of the distribution of resources and wealth within that economy. The statement correctly states that efficiency is related to the size of the economic pie, meaning that a more efficient economy can generate a larger pie. On the other hand, equity is related to how the pie gets sliced and distributed, emphasizing the importance of fair and equal distribution of resources. Therefore, the statement is true as it accurately describes the relationship between efficiency and equity.Rate this question:
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- 29.
The deadweight loss of a tax rises even more rapidly than the size of the tax.
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True
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False
Correct Answer
A. TrueExplanation
The deadweight loss of a tax refers to the loss of economic efficiency that occurs when a tax is imposed. It represents the reduction in consumer and producer surplus due to the distortionary effects of the tax. As the size of the tax increases, the deadweight loss increases even more rapidly. This is because as the tax gets larger, it creates larger distortions in the market, causing greater inefficiencies and reducing overall welfare to a greater extent. Therefore, the statement that the deadweight loss of a tax rises even more rapidly than the size of the tax is true.Rate this question:
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- 30.
The De Beers Diamond company is not worried about differentiating its product from all other gemstones.
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True
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False
Correct Answer
A. FalseExplanation
The De Beers Diamond company is actually very concerned about differentiating its product from all other gemstones. They have successfully created a marketing campaign that positions diamonds as rare, valuable, and symbolic of love and commitment. This has helped them establish a monopoly in the diamond industry and maintain high prices for their products. Therefore, the statement that they are not worried about differentiating their product from other gemstones is false.Rate this question:
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- 31.
The proper level of government intervention is ambiguous when dealing with a monopoly.
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True
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False
Correct Answer
A. TrueExplanation
The statement suggests that there is no clear consensus on the appropriate level of government intervention when it comes to dealing with a monopoly. This implies that different perspectives exist regarding whether the government should intervene heavily to regulate and control monopolistic practices, or whether a more hands-off approach should be taken. The ambiguity surrounding this issue stems from the complex trade-offs involved, as excessive government intervention could stifle innovation and competition, while too little intervention may allow monopolies to abuse their power and harm consumers.Rate this question:
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Mar 19, 2023Quiz Edited by
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Jan 11, 2020Quiz Created by
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