Which of the following is true?
a. Virtually all theories in economics are expressed using a ceteris paribus ("let everything else be equal" or "holding everything else constant") assumption.
b. The fallacy of composition is that, even if something is true for an individual, it is not necessarily true for many individuals as a group.
c. One must always be careful not to confuse correlation
with causation.
d. All of the above are true.
d
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Which part of the world is often classified as the "Fourth World" and why?
What will be an ideal response?
The sticky price explanation of the short-run aggregate supply curve says that when the average price level rises,
A. because of adjustment costs associated with changing prices, some firms will not raise their prices immediately which may temporarily boost their sales. B. firms will raise their output prices by more than the increase in the average price level to make up for the shortfall in sales. C. consumers are unwilling to pay higher prices resulting in a decrease in aggregate demand. D. some firms will immediately pass the higher prices to consumers.
How can diseconomies of scale occur at larger capacities?
What will be an ideal response?
Currently,
,where MPs and MPa are the marginal products of steel and aluminum for a company whose production function is Q = s0.5 a0.5. Ps = Pa = $1 are the prices of steel and aluminum, respectively, and the company has a total budget of $2 to spend on these inputs. If the market price of the output is $3 per unit, then how many units of s and a should the firm hire? What will be its output, revenue, costs, and profits?
What will be an ideal response?