In a command economy, decisions about how to allocate resources are made:
a. based upon tradition
b. by a central planning board.
c. by individuals and firms interacting in markets coordinated by a price system.
d. by a lottery system.
b
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Terry wants to sell his car and the lowest price he is willing to accept is $3,000 . Alice likes the car and is willing to pay at most $4,000 for it. They begin to negotiate to arrive at a price. Which of the following statements will be true?
a. They are playing a zero-sum game. b. The higher the price they agree on, the greater the benefit to both. c. The longer they take to arrive at an agreed price, the lower the benefit to them. d. They are playing a positive-sum game where their benefits add up to $1,000.
The supply curve for motor oil is the typical upward-sloping straight line, and the demand curve for motor oil is the typical downward-sloping straight line. When motor oil is taxed, the area on the relevant supply-and-demand graph that represents the deadweight loss is
a. larger than the area that represents consumer surplus in the absence of the tax. b. larger than the area that represents government's tax revenue. c. a triangle. d. All of the above are correct.