Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (2nd Edition)
2nd Edition
ISBN: 9780134641904
Author: Daron Acemoglu, David Laibson, John List
Publisher: PEARSON
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Question
Chapter 7, Problem 9Q
To determine
Effect of the government intervention on the coordination problem.
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The market mechanism that yields an efficient outcome tries on all of the following actions EXCEPT
a) consumers act in their own self interest to maximize their consumption
b) firms act in their own self interest to maximize profit
c) firms coordinate with each other on price
d) firms compete with each other for consumer purchases
In a market economy, what is the central coordinating mechanism?
How does a market economy solve the what, how, and for whom to produce problems?
Why does an economy’s strength ultimately reside in its people?
When Adam Smith talked about “the invisible hand” he argued that:
High transaction costs normally prevent markets from achieving equilibrium.
Prices, in the long run, end up where both fairness and efficiency are achieved.
Changing prices leads to an “end” which buyers and sellers are not totally pleased with, but one that is efficient.
Create mutually agreed upon prices over time if the market is subsidized.
As prices increase, demand falls, but supply rises, creating an equilibrium outcome.
Self-interested activities help eliminate shortages and surpluses if price ceilings and price floors are effectively utilized.
Chapter 7 Solutions
Microeconomics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (2nd Edition)
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- The BBC News reported that the war between Ukraine and Russia has resulted in food prices across the world increasing by 30%. Is this a reality for your country and if so explain two strategy that can be used to mitigate against this economic challenge.arrow_forwardSmith points out the possibility of producers contriving to raise prices. Are there other problems with the free-market system that he did not point out?arrow_forwardWhen countries specialize in producing certain goods and then freely exchange those goods for other goods with different countries, what is the advantage? Group of answer choices Each country can consume at a point outside their production possibilities frontier. All people in each country will be better off than they would be if they did not trade. Each country can produce at a point outside their production possibilities frontier. Each country can produce and consume at a point outside their production possibilities frontier.arrow_forward
- Alec and Ellie are the only detectives in the town of Broadchurch. Assume efficient production. Each has 10 hours in a day to allocate between conducting interviews and completing paperwork. They work independently and do not trade any jobs. Right now they each spend half their time completing paperwork and half their time conducting interviews. In one hour Alec can produce 4 interviews or 9 files of paperwork. In one hour, Ellie can produce 5 interviews or 1 files of paperwork. A trade is proposed between Alec and Ellie at the following price: 1 interview for 18 files of paperwork. If they trade at this price, they will fully specialize. At this price, what is the total number of interviews conducted in Broadchurch? Enter a number only.arrow_forwardMoving from an autarkic situation to engagement in international trade, a. excess demand in the country with absolute advantage should equal excess supply in the country without absolute advantage. b. excess supply in the country with absolute advantage should exceed excess demand in the country without absolute advantage. c. excess demand in the country with absolute advantage should exceed excess supply in the country without absolute advantage. d. excess supply in the country with absolute advantage should equal excess demand in the country without absolute advantage.arrow_forwardSuppose the Environmental Protection Agency (EPA) wants to mandate that all methane emissions must be reduced to zero in order to alleviate global warming in the United States. Which of the following describes why most economists would disagree with this policy? Reducing methane emissions is desirable, but whatever levels of pollution firms decide to emit privately are already efficient. Society would not benefit from lower air pollution. The environment isn’t worth protecting. The opportunity cost of zero pollution is much higher than its benefit.arrow_forward
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