Suppose that the market price of good X equals the firm's cost of producing that good, but it does not reflect any costs imposed on society. Which of the following is FALSE?
A) The good is priced too low.
B) An external benefit is associated with good X.
C) Resources are over-allocated in the production of good X.
D) Too much of good X is being produced.
Ques. 2Some pet owners are using an invisible fence to keep their animals from straying. Every time the animal steps over the edge of the property, it gets a mild shock. A social scientist would call the shock
A) a bribe.
B) a reward.
C) a disincentive.
D) a normative incentive.
Ques. 3The alternative quantities demanded for a given time period at different possible prices is known as
A) absolute demand.
B) a demand schedule.
C) real demand.
D) constant demand.
Ques. 4Whom among the following was a classical economist?
A) Adam Smith
B) A. C. Pigou
C) David Ricardo
D) all of the above
Ques. 5Fred and Ann both decide to see the same movie when they are given free movie tickets. We know that
A) both bear an opportunity cost since they could have done other things instead of see the movie.
B) both bear the same opportunity cost since they are doing the same thing.
C) the cost of going to the movie is greater for the one who had more choices to do other things.
D) neither bears an opportunity cost because the tickets were free.
Ques. 6Which of the following is TRUE of unemployment?
A) It is defined as the number of people actively looking for work who do not have jobs.
B) The result is that the economy operates inside its production possibilities curve.
C) There are psychological consequences associated with unemployment.
D) All of the above.
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