- The local market for bankers is currently in
equilibrium. Which of the following increases
the local wage paid to bankers?
(A) Internet banking at home is becoming
more popular.
(B) More college students are majoring in
finance and economics, majors that make
them attractive as bank employees.
(C) The price of banking software, a comple-
mentary resource to bankers, rises.
(D) Several banks in the local market merge
and consolidate many operations.
(E) The price of automatic teller machines, a
substitute for bankers, decreases and the
output effect is greater than the substitu-
tion effect.- The U.S. government collects tax revenue, buys
military equipment from many private firms, and
uses this equipment to provide national defense
to all Americans. This is a good example of
(A) a natural monopoly.
(B) an excise tax on military equipment.
(C) a regressive tax.
(D) a public good.
(E) deadweight loss.- Which of the following scenarios is the best
example of a positive externality?
(A) Your neighbor has a swimming pool and
throws loud late-night parties.
(B) Your neighbor has a swimming pool and
allows you free access.
(C) Your neighbor has a swimming pool and
the powerful chlorine odor blows into your
open dining room window.
(D) Your neighbor has a swimming pool and
allows you to use it in exchange for letting
his kids use your swing.
(E) Your neighbor has a swimming pool that is
conducive for the breeding of mosquitoes.- Because of the free-rider effect, the private mar-
ketplace tends to
(A) provide the allocatively efficient amount of
a public good.
(B) produce too much of a public good, requir-
ing the government to intervene and tax
the production of it.
(C) produce a public good in the amount
where the marginal benefit to society equals
the marginal cost to society.
(D) produce too little of the public good,
requiring the government to intervene and
provide it for all.
(E) produce too little of the public good,
requiring the government to intervene and
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