Government officials tend to make:
A. better economic decisions than private individuals because of the wealth of information at
their disposal.
B. better economic decisions than private individuals because of the efficient processes and
flexibility built into the government bureaucracy.
C. inefficient choices because they lack the information necessary to accurately weigh
marginal benefits and marginal costs.
D. inefficient choices because the invisible hand directs them away from the resource
allocation where marginal benefits equal marginal costs.
Answer: C
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Production and exchange is beneficial as long as the demand curve lies below the supply curve
a. True b. False
The market price for wallets is $20. Your technology is such that at your most efficient production point, the average total cost of producing a wallet is $2.50. Your manager runs into your office and shouts, "Boss!!! Average costs are rising!! Average costs are rising!!" To make a profit-maximizing decision, you should:
A. ask the manager about the average total cost. B. immediately stop production. C. completely ignore your manager. D. ask the manager about the marginal cost.