In an Economy in Which Decisions Are Guided by Prices

question 21

Multiple Choice

In an economy in which decisions are guided by prices and individual self-interest,there is

• A)the potential to achieve efficiency in production.
• B)a strong need for government intervention in the market.
• C)less efficiency than would be observed in a centrally-planned economy.
• D)more need for a strong legal system to control individual greed than would be needed in a centrally-planned economy.

Understand the concept of Pareto improvement and social efficiency in monopoly markets.

Predict the outcomes in markets with unique products or demands, like zwiffle or slops.

Understand the concept of monopoly and profit-maximizing output and price in different scenarios.

Comprehend the impact of taxes on the pricing strategy of a monopolist.

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