Which of the following will shift the consumption function upward?
a. A decrease in stock prices
b. An increase in stock prices
c. A higher price level
d. A lower disposable income
e. A higher disposable income
QUESTION 2Which of the following is true when profit-maximizing firms in a competitive market are allowed to freely emit negative externalities on society?
a. Consumers are paying a market equilibrium price that reflects the full social marginal cost of production.
b. Consumers are paying a market equilibrium price that reflects only the external marginal cost of production.
c. Consumers are paying a market equilibrium price that is less than the socially efficient price, and consuming more than the socially efficient quantity. This means society is implicitly subsidizing producers by allowing them to pollute.
d. None of the above is correct.
QUESTION 3If a bank has 1 million in assets and 50,000 in net worth, its liabilities must equal:
a. 50,000.
b. 1,050,000.
c. 50 million.
d. 1,000,000.
e. 950,000.
QUESTION 4A decrease in stock prices will _____ the net wealth of households and _____ consumption.
a. reduce; increase
b. reduce; decrease
c. reduce; not change
d. increase; increase
e. increase; decrease
QUESTION 5Which of the following offers the best economic justification for subsidizing vaccinations for infectious disease on the basis of efficiency?
a. Vaccinations create a positive externality for society because they reduce the chances the scope of epidemics.
b. Vaccinations are a type of pollution that increase the chances and the scope of epidemics.
c. A politician offering subsidized vaccinations may be able to get more votes from lower income people and get elected.
d. None of the answers above are correct.
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