Production by a monopoly would result in the socially optimal allocation of resources if
a. price is set equal to marginal cost
b. marginal revenue is set equal to price
c. marginal revenue is set equal to marginal cost
d. price is set equal to average total cost
e. marginal revenue is set equal to average total cost
A
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An economy is at full employment. Which of the following events can create a recessionary gap?
A) an increase in foreign income B) an increase in taxes C) a decrease in the quantity of capital D) a decrease in money wages
Suppose that a large rogue wave destroys the (thankfully unoccupied) fleet of swordfish fishing boats docked in the Gloucester, Massachusetts harbor. What happens to the earnings of fishermen and women in Gloucester?
a. The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall. b. The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to fall. c. The reduction in the supply of fishing boats increases the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise. d. The reduction in the supply of fishing boats reduces the marginal productivities of Gloucester fishermen and women, which causes the equilibrium wage to rise.