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In macroeconomics, potential GDP refers to the level of real output an economy can produce when:
AResources (labor and capital) are fully employed at their natural capacity
BInflation is zero
CGovernment spending equals tax revenue
DUnemployment is strictly 0%
In first-degree (perfect) price discrimination, a monopolist charges each consumer:
AThe same uniform price regardless of quantity bought
BThe maximum price each consumer is willing to pay
CA price equal to marginal cost
DA lower price for bulk purchases only
Deadweight loss resulting from monopoly power represents:
AThe loss in total economic surplus (consumer + producer surplus) due to underproduction
BThe profit earned by the monopolist
CThe tax revenue collected by the government
DThe increase in fixed costs
The concept of ‘Excess Capacity’ is a defining long-run characteristic of which market structure?
AMonopoly
BMonopolistic Competition
CPerfect Competition
DMonopsony
The prisoner’s dilemma in game theory demonstrates why two rational actors might not cooperate, even when:
ACooperation yields a better collective outcome for both
BNeither actor has a dominant strategy
CPayoffs are completely unknown to both players
DCooperation yields a worse outcome for both
An externality is classified as a market failure because:
AIt causes government budget deficits
BMarket prices do not reflect the full social costs or social benefits of production/consumption
CFirms make excessive profits
DPrices become excessively rigid
According to the Coase Theorem, private bargaining can solve externality problems efficiently without government intervention provided:
ATaxes are levied on all polluters
BProperty rights are clearly defined and transaction costs are negligible
CThe market is a natural monopoly
DIncome distribution is strictly equal
Public goods are characterized by two distinct properties:
ANon-rivalry and Non-excludability
BNon-rivalry and Excludability
CRivalry and Excludability
DRivalry and Non-excludability
Net Domestic Product (NDP) is obtained by subtracting which component from Gross Domestic Product (GDP)?
ADepreciation (Capital Consumption Allowance)
BSubsidies
CNet Factor Income from Abroad
DDirect Taxes
The Marginal Propensity to Save (MPS) plus the Marginal Propensity to Consume (MPC) is always equal to:
AZero
BOne
CThe Investment Multiplier
DTotal National Income