Regulating an industry to remove all economic profit
A. removes all incentive for efficiency and responsiveness to consumer demand.
B. removes distortions caused by cross subsidies.
C. removes allocative inefficiency.
D. increases incentives to be productively efficient.
Answer: A
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In 2000, you could buy a Cadillac DTS for $45,000. In 2011, the Cadillac DTS sold for $55,000
While both models include anti-lock brakes and air bags (along with other similar features), the 2011 model also includes satellite radio and new technology that provides improved gas mileage and safer driving. If the Cadillac DTS was included in the CPI basket, it would create A) a downward bias in the inflation rate. B) an upward bias in the CPI as a result of quality change bias. C) an upward bias in the CPI as a result of commodity substitution bias. D) a downward bias in the CPI as a result of new goods bias.
Three individuals have $1000 and identical preferences for gum, g, and cigarettes, s, as measured by the utility function U(g,s) = 10g0.9s0.1. The price of gum is $9 and the price of cigarettes is $12. What is the market surplus/shortage at a price of $12 when the supply of cigarettes is 5?
A) There will be a shortage of 3 cigarettes. B) There will be a surplus of 3 cigarettes. C) There will be a shortage of 2/3 cigarettes. D) There will be a surplus of 2/3 cigarettes.