A dentist shares an office building with a radio station. The electrical current from the dentist's drill causes static in the radio broadcast, causing the radio station to lose $10,000 in profits. The radio station could put up a shield at a cost of $30,000 . the dentist could buy a new drill that causes less interference for $6,000 . Either would restore the radio station's lost profits. What
is the economically efficient outcome?
a. The radio station puts up a shield, which it pays for.
b. The radio station puts up a shield, which the dentist pays for.
c. Neither the radio station nor the dentist purchase additional equipment.
d. The dentist gets a new drill; it does not matter who pays for it.
d
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Which of the following statements is always true with respect to oligopolists?
a. They react slowly to actions taken by other firms b. They lower prices together c. They raise prices together d. They know with certainty what they other firms will do e. They take into consideration how other firms might react.
A liquidity trap occurs when
A. the demand for loans increases in a country on the gold standard, so that the monetary supply is not able to increase and interest rates rise dramatically. B. any additions to the monetary base are held as cash by people or reserves at banks. C. there are runs on banks that are solvent but illiquid. D. the Fed increases the money supply, causing the expected inflation rate to rise more than the real interest rate declines, so that the nominal interest rate increases.