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Economic Policy

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1. A lawyer who drives a beat-up car and wears frumpy clothes may have a hard time getting clients. Potential clients may conclude from his appearance that he is poor, and if he is poor, he probably is not very good. If the above is true for a lawyer dressing in expensive and stylish clothing is a way of:

a) internalizing externalities.
b) changing a nonrival good into a rival good.
c) changing a nonexcludable good into an excludable good.
d) signaling quality.

2. A market for information is more likely to develop even in the absence of government regulation of information as long as the marginal:

a) cost of information is zero.
b) benefit of information is zero.
c) cost of information exceeds the marginal benefit.
d) benefit of information exceeds the marginal cost.

3. Opponents to government intervention argue that government makes decisions based upon

a) marginal social costs and marginal social benefits.
b) marginal political costs and marginal political benefits.
c) irrational choices.
d) total costs and total benefits

4. An effluent fee is an example of

a) voluntary approach to pollution.
b) direct regulation of pollution.
c) a tax incentive policy.
d) a market incentive policy.

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Economics discussion: state of the economy, recent monetary policy, the Fed

A. Characterize the state of the economy.
b. Is the Federal Reserve more concerned about high inflation or the possibility of a recession? Or, is the Federal Reserve more concerned about other issues? If so, what are they?
c. What is the stated direction of recent monetary policy? What policy actions have the Federal Reserve taken to confirm that direction?

I tried to answer these questions, by going to the Federal Reserve Web site http://www.federalreserve.gov

I located the sections for Testimony and Speeches and the section for Monetary Policy Report to the Congress.

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