Macroeconomics Midterm
The market system's answer to the fundamental question "How will the system accommodate change?" is essentially: -"Through the guiding function of prices and the incentive function of profits." -"Through government leadership and direction." -"Through training and retraining programs." -"Through trial and error."
-"Through the guiding function of prices and the incentive function of profits."
) Assume that a consumer has a given budget or income of $12, and that she can buy only two goods, apples or bananas. The price of an apple is $1.50 and the price of a banana is $0.75. Refer to the information given above. For this consumer, the opportunity cost of buying one more apple is: -1 banana -2 bananas -0.8 of a banana -0.5 of a banana
-2 bananas
The economic principle that "unemployment rate will tend to increase as the economy moves into a recession" is an example of: -An assumption -A loaded terminology - A generalization -A normative statement
-A generalization
The statement in a newspaper that "consumer prices rose last month by 1 percent, and if this trend continues, the annual rate of inflation will be 12 percent for the year" is an example of: -A normative economic statement -Microeconomic analysis -Rational self-interest -A positive economic statement
-A positive economic statement
Economic growth may be represented by: -A movement from one end of the production possibilities curve to the other -An upward-sloping production possibilities curve -A rightward shift of the production possibilities curve -A movement from a point inside to a point on the production possibilities curve
-A rightward shift of the production possibilities curve
The slope of a graph that shows a direct relationship is: -Either zero or infinite -Always positive -Possibly zero -Either positive or negative
-Always positive
Assuming competitive markets with typical supply and demand curves, which of the following statements is correct? -An increase in supply with a decrease in demand will result in an increase in price. -An increase in supply with no change in demand will result in a decline in sales. -An increase in demand with no change in supply will result in an increase in sales. -An increase in supply with no change in demand will result in an increase in price
-An increase in demand with no change in supply will result in an increase in sales.
Which of the following will cause the demand curve for product A to shift to the left? -Population growth that causes an expansion in the number of persons consuming A. -A decrease in the price of complementary product C. -An increase in money income if A is an inferior good. -An increase in money income if A is a normal good.
-An increase in money income if A is an inferior good.
An economic model is a purposeful simplification of reality, whose function includes: -Predicting the behavior of each and every individual or organization -Forecasting economic random events with a high level of accuracy -Understanding the full complexity of the real world -Analyzing the behavior of a typical or average consumer or firm
-Analyzing the behavior of a typical or average consumer or firm
If an inverse relationship exists between two variables, then: -As one variable increases, the other decreases -Both variables increase over time -The two variables are close substitutes for each other -As one variable increases, so does the other
-As one variable increases, the other decreases
A point inside the production possibilities curve is ________ while a point outside the curve is ________. -The maximum possible; below the maximum possible -Attainable; unattainable -Below the maximum possible; the maximum possible -Unattainable; attainable
-Attainable; unattainable
Economics is a social science that studies how individuals, institutions, and society may: -Best use resources to maximize satisfaction of economic wants -Reduce the amount of goods and services they need -Expand the amount of resources available to them -Attain a minimum level of production
-Best use resources to maximize satisfaction of economic wants
Suppose there are two economies, Alpha and Beta, which have the same production possibilities curves. If Beta devotes more resources to produce capital goods than consumer goods as compared to Alpha, then in the future: -Alpha will not be able to achieve full employment or productive efficiency -Alpha will experience greater economic growth than Beta -Beta will not be able to achieve full employment or productive efficiency -Beta will experience greater economic growth than Alpha
-Beta will experience greater economic growth than Alpha
Which pitfall to sound economic reasoning is illustrated when a person comments that "capitalists focus only on profits and don't care about their workers"? -Abstraction -The fallacy of composition -Biases -Confusing correlation and causation
-Biases
The role of the entrepreneur in society is to: -Provide capital to the firm which the management combines with labor -Control the land upon which all production takes place to get the most rent -Regulate what products are considered safe to market -Bring the factors of production together and take the risks of producing
-Bring the factors of production together and take the risks of producing
In a relationship between two variables, the "independent variable" refers to the: -Cause or source variable -One whose value is assumed constant -Effect or outcome -One measured on the vertical axis, in the convention of mathematics
-Cause or source variable
Which of the following is a distinguishing feature of a command system? -Heavy reliance on markets. -Private ownership of all capital. -Central planning. -Widespread dispersion of economic power.
-Central planning.
Specialization and international trade allows a nation to -Consume a combination of goods that is beyond (or outside) its production possibilities -Produce a combination of goods that is beyond (or outside) its production possibilities -Consume a lot of goods without having to produce any output -Have an upward-sloping production possibilities curve
-Consume a combination of goods that is beyond (or outside) its production possibilities
From an economic perspective, when a student decides to go to the movies instead of studying for a test, it indicates that in the student's thinking the marginal: -Cost of going to the movies is less than the marginal benefit of going to the movies -Cost of going to the movies is greater than the marginal cost of studying -Benefit of studying are greater than the marginal benefit of going to the movies -Benefit of studying is greater than the marginal cost of studying
-Cost of going to the movies is less than the marginal benefit of going to the movies
If two variables are completely unrelated to each other, then graphing these two variables will yield a line that is: -Always vertical -Always horizontal -Either vertical or horizontal -Not a line, but only a single point
-Either vertical or horizontal
If two variables are completely unrelated to each other, then graphing these two variables will yield a line that is: -Either vertical or horizontal -Not a line, but only a single point -Always vertical -Always horizontal
-Either vertical or horizontal
Which of the following is another way of saying "marginal benefits of an action"? -Unintended gains from taking the action -Extra benefits resulting from the action -Benefits given up, once the action is taken -Benefits accruing to others, as a result of one's action
-Extra benefits resulting from the action
A price floor in a competitive market will result in persistent shortages of a product. -True -False
-False
An increase in quantity supplied might be caused by an increase in production costs. -True -False
-False
Economic growth is shown as an increase in production from inside the possibilities curve out toward a point on the possibilities curve -True -False
-False
If A is the dependent variable and B is the independent variable, then a change in A results in a change in B. -True -False
-False
If society has over-allocated resources to a particular activity, then the marginal benefits of the activity would be less than the marginal costs. -True -False
-False
If the marginal benefits are greater than the marginal cost of an activity, then society should allocate fewer resources to this activity. -True -False
-False
If two sets of data are inversely related, they will appear on a graph as an upward-sloping line. -True -False
-False
The budget line shows the various incomes that an individual can earn from different jobs. -True -False
-False
The quantity or supply of land resources available to a nation is pretty much fixed and cannot increase over time. -True -False
-False
A market system tends to restrict business risk to owners and investors. This results in which of the following benefits? -Income becomes more equally distributed. -Firms focus attention on prudent risk management, as it is profitable to manage risk. -It encourages more people to become entrepreneurs. -Firms have to pay more to attract inputs, as these inputs have to share the risk
-Firms focus attention on prudent risk management, as it is profitable to manage risk.
Which of the following statements is correct? -If demand increases and supply decreases, equilibrium price will fall. -If supply declines and demand remains constant, equilibrium price will fall. -If demand decreases and supply increases, equilibrium price will rise. -If supply increases and demand decreases, equilibrium price will fall.
-If supply increases and demand decreases, equilibrium price will fall.
"In the corn market, demand often exceeds supply and supply sometimes exceeds demand." "The price of corn rises and falls in response to changes in supply and demand." In which of these two statements are the terms demand and supply being used correctly? -In the second statement. -In both statements. -In neither statement. -In the first statement.
-In the second statement.
As a consequence of the problem of scarcity: -Only some people can "have it all" -Things which are plentiful have relatively high prices -There is never enough of anything -Individuals have to make choices from among alternatives
-Individuals have to make choices from among alternatives
A point or product-combination to the left of and inside a budget line: -Costs more than a combination or point on the budget line -Is attainable, but a combination or point to the right of the line is unattainable -Costs more than a combination or point outside the budget line -Is unattainable, but a combination or point to the right of the line is attainable
-Is attainable, but a combination or point to the right of the line is unattainable
Because of increasing opportunity costs, the production possibility curve: -At first rises, then falls eventually -Is bowed out from (or concave to) the origin -Can be either downward- or upward-sloping -Is a straight downward-sloping line
-Is bowed out from (or concave to) the origin
The economizing problem is essentially one of deciding how to make the best use of: -Limited resources to satisfy limited economic wants -Unlimited resources to satisfy unlimited economic wants -Limited resources to satisfy unlimited economic wants -Unlimited resources to satisfy limited economic wants
-Limited resources to satisfy unlimited economic wants
Which pitfall to sound economic reasoning is reflected in a person's view that "pharmaceutical and oil companies are price-gouging the consumers"? -Confusing correlation and causation -Loaded terminology -Faulty definition -Post hoc fallacy
-Loaded terminology
When a nation is under-allocating resources to the production of a good, then the: -Marginal benefit is less than the marginal cost of the good -Marginal benefit is greater than the marginal cost of the good -Marginal benefit of producing the good is increasing -Marginal cost of producing the good is decreasing
-Marginal benefit is greater than the marginal cost of the good
From an economic perspective, when a consumer decides to buy more life insurance, the consumer has most likely concluded that the: -Marginal benefit of more insurance coverage is greater than zero -Marginal benefit of more insurance coverage is greater than the marginal cost -Marginal cost of more insurance coverage is equal to the payment for the extra coverage -Marginal cost of more insurance coverage is negative
-Marginal benefit of more insurance coverage is greater than the marginal cost
From an economic perspective, when consumers leave a fast-food restaurant because the lines to be served are too long, they have concluded that the: -Marginal cost of waiting is less than the marginal benefit of being served -Management is exhibiting irrational behavior by not maximizing profits -Marginal cost of waiting is greater than the marginal benefit of being served -Management is making an assumption that other things are equal
-Marginal cost of waiting is greater than the marginal benefit of being served
Matt observes that "there is a high correlation between educational attainment and the level of income." Jean concurs and adds that "high school graduates should all proceed to college." -Matt's statement is positive while Jean's statement is normative -Both Matt's and Jean's statements are normative -Both Matt's and Jean's statements are positive -Matt's statement is normative while Jean's statement is positive
-Matt's statement is positive while Jean's statement is normative
One basic difference between "land" and "capital" resources is that land is: -Natural while capital is man-made -Unlimited while capital is limited -Manufactured while capital is man-made -Limited while capital is unlimited
-Natural while capital is man-made
In a graph of the production possibilities curve, the two axes of the graph indicate the: -Price of the products on the vertical axis, and quantities on the horizontal -Prices of the two products that a nation can produce -Maximum quantities of the two resources that a nation possesses -Quantities of the two products that a nation can produce
-Quantities of the two products that a nation can produce
Since World War II: -North Korea's market economy has significantly outperformed South Korea's command economy. -South Korea's command economy has significantly outperformed North Korea's market economy. -North Korea's command economy has significantly outperformed South Korea's market economy. -South Korea's market economy has significantly outperformed North Korea's command economy
-South Korea's market economy has significantly outperformed North Korea's command economy
At the output where the combined amounts of consumer and producer surplus are largest: -marginal benefit exceeds marginal cost by the greatest amount. -the areas of consumer and producer surplus necessarily are equal. -consumer surplus exceeds producer surplus by the greatest amount. -the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.
-the maximum willingness to pay for the last unit of output equals the minimum acceptable price of that unit of output.
Because the federal government typically provides disaster relief to farmers, many farmers do not buy crop insurance even through it is federally subsidized. This illustrates: -the special interest effect. -logrolling. -the adverse selection problem. -the moral hazard problem.
-the moral hazard problem.
What two conditions must hold for a competitive market to produce efficient outcomes? -Firms must maximize profits, and consumers must all pay prices equal to their maximum willingness to pay. -Demand curves must reflect all costs of production, and supply curves must reflect consumers' full willingness to pay. -Firms must minimize production costs, and consumers must minimize total expenditures. -Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.
-Supply curves must reflect all costs of production, and demand curves must reflect consumers' full willingness to pay.
The economic perspective focuses largely on marginal analysis, which means analyzing: -The changes in the situation that would result from a given action -Peripheral elements of a given issue or action -Emotional and psychological facets of a given action -The minor aspects of a given issue or decision
-The changes in the situation that would result from a given action
The economic perspective focuses largely on marginal analysis, which means analyzing: -Emotional and psychological facets of a given action -The changes in the situation that would result from a given action -The minor aspects of a given issue or decision -Peripheral elements of a given issue or action
-The changes in the situation that would result from a given action
Which of the following best describes the invisible-hand concept? -The market system is the best system for overcoming the scarce resources-unlimited wants problem. -Central direction by the government will improve resource allocation in a capitalistic economy. -The nonsubstitutability of resources creates a conflict between private and public interests and calls for government intervention. -The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
-The desires of resource suppliers and producers to further their own self-interest will automatically further the public interest.
Other things equal, which of the following might shift the demand curve for gasoline to the left? -An increase in the price of train and air transportation. -A large decline in the price of automobiles. -The discovery of vast new oil reserves in Montana. -The development of a low-cost electric automobile.
-The development of a low-cost electric automobile.
If the production possibilities curve is a straight line, then: -The opportunity cost of producing one good is zero -The society can produce more of both goods simultaneously -The law of increasing opportunity costs does not apply -The society is capable of producing only one of the goods and not the other
-The law of increasing opportunity costs does not apply
If economic resources are perfectly interchangeable between the two products shown on a production possibilities graph: -More of one product can be produced without producing less of the other product -The two products are of equal value to the economy -The production possibilities curve would be a straight line -The economy will always be at full employment
-The production possibilities curve would be a straight line
Which one of the following is a normative economic statement? -To help balance the Federal budget, Congress increased the tax on gasoline to its highest level in the past ten years -Consumer prices are rising at a faster rate than in past months, indicating a renewal of inflationary pressures on the economy -The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy -The unemployment rate fell for the fourth straight month, reflecting the effects from stronger economic growth in the second quarter
-The worsening balance of trade must be corrected if this nation is to remain competitive in the world economy
An assumption is usually made in a two-axes (or two-dimensional) graph that, aside from the two variables under study, the influence of all other variables or factors is assumed to be constant -True -False
-True
An assumption is usually made in a two-axes (or two-dimensional) graph that, aside from the two variables under study, the influence of all other variables or factors is assumed to be constant. -True -False
-True
An increase in demand accompanied by an increase in supply will increase the equilibrium quantity, but the effect on equilibrium price will be indeterminate. -True -False
-True
If demand increases and supply simultaneously decreases, equilibrium price will rise. -True -False
-True
In a competitive market, every consumer willing to pay the market price can buy a product and every producer willing to sell the product at that price can sell it. -True -False
-True
The resource category called "land" includes forests, animals, and water resources. -True -False
-True
Which of the following is the fallacy in the fallacy of composition? -Whatever goes up must come down -Facts are more important than theories -If event B occurs after event A, event A must have caused event B -What is true for the part is necessarily also true for the whole
-What is true for the part is necessarily also true for the whole
Which question is an example of a macroeconomic question? -What is the level of industrial concentration in the U.S. automobile industry? -What policies would be recommended for stimulating national economic growth? -What economic incentives can be used to reduce the cost of health care in the nation? -What market conditions are expected for milk in the nation this year?
-What policies would be recommended for stimulating national economic growth?
Which of the following is not one of the five fundamental questions? -How will the system promote progress? -What prices will be charged for goods and services? -Who will get the goods and services? -What goods and services will be produced?
-What prices will be charged for goods and services?
Economic systems differ according to which two main characteristics? -Who owns the factors of production and the methods used to coordinate economic activity. -The political system in place and the degree of scarcity facing the economy. -The technology used in production and the quantity and quality of natural resources. -How goods are produced and who gets them
-Who owns the factors of production and the methods used to coordinate economic activity.
Which of the following exemplifies a microeconomic question? -Will a new type of electronic reader or tablet increase the number of buyers? -Is the economy experiencing a decline in the rate of inflation? -Is the aggregate output in the economy greater this year than last year? -What is the current national rate of unemployment?
-Will a new type of electronic reader or tablet increase the number of buyers?
Specialization—the division of labor—enhances productivity and efficiency by: -avoiding the time loss involved in shifting from one production task to another. -allowing workers to develop skills by working on one, or a limited number, of tasks. -allowing workers to take advantage of existing differences in their abilities and skills. -all of the means identified in the other answers
-all of the means identified in the other answers
Two major virtues of the market system are that it: -results in an equitable personal distribution of income and always maintains full employment. -allocates resources efficiently and allows economic freedom. -results in price level stability and a fair personal distribution of income. -eliminates discrimination and minimizes environmental pollution.
-allocates resources efficiently and allows economic freedom.
Because of unseasonably cold weather, the supply of oranges has substantially decreased. This statement indicates the: -price of oranges will fall. -amount of oranges that will be available at various prices has declined. -equilibrium quantity of oranges will rise. -demand for oranges will necessarily rise.
-amount of oranges that will be available at various prices has declined.
The invisible hand concept suggests that: -big businesses are inherently more efficient than small businesses. -assuming competition, private and public interests will coincide. -the competitiveness of a capitalistic market economy invariably diminishes over time. -market failures imply the need for a national economic plan
-assuming competition, private and public interests will coincide.
Professional buyers of antiques often have more information about the value of antique objects than do the sellers. This illustrates: -the principal-agent problem. -asymmetric information. -the free-rider problem. -the moral hazard problem.
-asymmetric information.
"Consumer sovereignty" means that: -buyers can dictate the prices at which goods and services will be offered. -advertising is ineffective because consumers already know what they want. -buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers. -buyers control the quality of goods and services through regulatory agencies.
-buyers determine what will be produced based on their "dollar votes" for the goods and services offered by sellers.
The rationing function of prices refers to the: -tendency of supply and demand to shift in opposite directions. -capacity of a competitive market to equalize quantity demanded and quantity supplied. -ability of the market system to generate an equitable distribution of income. -fact that ration coupons are needed to alleviate wartime shortages of goods.
-capacity of a competitive market to equalize quantity demanded and quantity supplied.
Firms are motivated to minimize production costs because: -the government provides tax credits and subsidies to low-cost producers. -competitive pressures in the market will drive out higher-cost producers. -it is the most environmentally friendly way to produce goods. -least-cost production techniques use the smallest total quantity of resources.
-competitive pressures in the market will drive out higher-cost producers.
There will be a surplus of a product when: -the demand and supply curves fail to intersect. -price is below the equilibrium level. -consumers want to buy less than producers offer for sale. -the supply curve is downward sloping and the demand curve is upward sloping.
-consumers want to buy less than producers offer for sale.
"Under central planning, some group has to decide how to get the necessary inputs produced in the right amounts and delivered to the right places at the right time. This is a nearly impossible task without markets and profits." This quotation best identifies the: -resource overcommitment problem under communism. -self-sufficiency dilemma under communism. -incentive problem under central planning. -coordination problem under central planning.
-coordination problem under central planning.
With a downsloping demand curve and an upsloping supply curve for a product, a decrease in resource prices will: -decrease equilibrium price and quantity. -increase equilibrium price and quantity. -increase equilibrium price and decrease equilibrium quantity. -decrease equilibrium price and increase equilibrium quantity.
-decrease equilibrium price and increase equilibrium quantity.
Assume in a competitive market that price is initially above the equilibrium level. We can predict that price will: -decrease, quantity demanded will increase, and quantity supplied will decrease. -decrease, quantity demanded will decrease, and quantity supplied will increase. -decrease and quantity demanded and quantity supplied will both decrease. -increase, quantity demanded will decrease, and quantity supplied will increase.
-decrease, quantity demanded will increase, and quantity supplied will decrease.
In a market economy a significant change in consumers' desire for product X will: -cause some industries to expand and others to contract. -cause a reallocation of scarce resources. -alter the profits or losses received by suppliers of product X. -do all of these.
-do all of these.
If a competitive industry is neither expanding nor contracting, we would expect: -economic profits to be zero. -total revenue to be zero. -total opportunity cost to be zero. -more resources to flow to that industry.
-economic profits to be zero.
The "coincidence of wants" problem associated with barter refers to the fact that: -money must be used as a medium of exchange or trade will never occur. -buyers in resource markets and sellers in product markets can never engage in exchange. -for exchange to occur, each seller must have a product that some buyer wants. -specialization is restricted by the size or scope of a market
-for exchange to occur, each seller must have a product that some buyer wants.
A price floor means that: -sellers are artificially restricting supply to raise price. -government is imposing a minimum legal price that is typically above the equilibrium price. -government is imposing a maximum legal price that is typically below the equilibrium price. -inflation is severe in this particular market.
-government is imposing a minimum legal price that is typically above the equilibrium price.
Unlike a private good, a public good: -has benefits available to all, including nonpayers. -produces no positive or negative externalities. -is characterized by rivalry and excludability. -has no opportunity costs.
-has benefits available to all, including nonpayers.
The simple circular flow model shows that: -households are on the selling side of the resource market and on the buying side of the product market. -businesses are on the buying side of the product market and on the selling side of the resource market. -households are on the buying side of both product and resource markets. -businesses are on the selling side of both product and resource markets.
-households are on the selling side of the resource market and on the buying side of the product market.
Risk is a problem faced: -only in market systems. -only in command systems. -in both market systems and command systems. -in neither market systems nor command systems, only in laissez-faire capitalism.
-in both market systems and command systems.
Given a downsloping demand curve and an upsloping supply curve for a product, an increase in the price of a substitute good (from the buyer's perspective) will: -increase equilibrium price and quantity. -decrease equilibrium price and quantity. -decrease equilibrium price and increase equilibrium quantity. -increase equilibrium price and decrease equilibrium quantity
-increase equilibrium price and quantity.
Assume product A is an input in the production of product B. In turn, product B is a complement to product C. We can expect a decrease in the price of A to: -decrease the supply of B and increase the demand for C. -increase the supply of B and increase the demand for C. -decrease the supply of B and decrease the demand for C. -increase the supply of B and decrease the demand for C.
-increase the supply of B and increase the demand for C.
An economic system: -is a plan or scheme that allows a firm to make money at some other firm's expense. -requires a grouping of private markets linked to one another. -requires some sort of centralized authority (such as government) to coordinate economic activity. -is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
-is a particular set of institutional arrangements and a coordinating mechanism used to respond to the economizing problem.
Producer surplus: -rises as equilibrium price falls. -is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price. -is the difference between the maximum prices consumers are willing to pay for a product and the lower equilibrium price. -is the difference between the maximum prices consumers are willing to pay for a product and the minimum prices producers are willing to accept.
-is the difference between the minimum prices producers are willing to accept for a product and the higher equilibrium price.
If a legal ceiling price is set above the equilibrium price: -a black market will evolve. -neither the equilibrium price nor the equilibrium quantity will be affected. -a surplus of the product will occur. -a shortage of the product will occur.
-neither the equilibrium price nor the equilibrium quantity will be affected.
The demand for most products varies directly with changes in consumer incomes. Such products are known as: -competitive goods. -normal goods. -complementary goods. -inferior goods.
-normal goods.
The coordination problem in the centrally planned economies refers to the idea that: -the price level and the level of employment were inversely related. -planners had to direct required inputs to each enterprise. -the immediate effect of more investment was less consumption. -exports had to be equal to imports for a central plan to work.
-planners had to direct required inputs to each enterprise.
The construction of demand and supply curves assumes that the primary variable influencing decisions to produce and purchase goods is: -incomes. -price. -preferences. -expectations.
-price.
The market system does not produce public goods because: -public enterprises can produce such goods at lower cost than can private enterprises. -private firms cannot stop consumers who are unwilling to pay for such goods from benefiting from them. -their production seriously distorts the distribution of income. -there is no need or demand for such goods.
-private firms cannot stop consumers who are unwilling to pay for such goods
According to the Coase theorem: -private firms should not provide public goods. -taxes should be levied such that they change private behavior as little as possible. -private individuals can often negotiate their own resolution of externality problems, without the need for government intervention. -government should levy excise taxes on firms that generate spillover or external costs
-private individuals can often negotiate their own resolution of externality problems, without the need for government intervention.
If we say that a price is too high to clear the market, we mean that: -the equilibrium price is above the current price. -the price of the good is likely to rise. -quantity demanded exceeds quantity supplied. -quantity supplied exceeds quantity demanded.
-quantity supplied exceeds quantity demanded.
Specialization in production is important primarily because it: -allows society to have fewer capital goods. -results in greater total output. -allows society to trade by barter. -allows society to avoid the coincidence-of-wants problem.
-results in greater total output.
According to the concept of the "invisible hand," if Susie opens and operates a profitable childcare center, then: -the profit Susie earns indicates that she is overcharging for her services. -this demonstrates that consumer sovereignty is not present in this market. -government should regulate the business to ensure quality. -she has served society's interests by providing a desired good or service.
-she has served society's interests by providing a desired good or service.
Graphically, the market demand curve is: -steeper than any individual demand curve that is part of it. -the vertical sum of individual demand curves. -greater than the sum of the individual demand curves. -the horizontal sum of individual demand curves.
-the horizontal sum of individual demand curves.
