A perfectly elastic supply curve is
A. a straight line that crosses the horizontal axis.
B. a vertical straight line.
C. a straight line coming out of the origin.
D. a horizontal straight line.
Answer: D
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The law of diminishing returns states that: a. as additional increments of resources are added to producing a good or service, the marginal benefit from those additional increments will increase. b. as society moves from one choice to another, the production of physical capital declines. c. it is impossible to get more of one good without giving up some amount of the other good
d. as additional increments of resources are added to producing a good or service, the marginal benefit from those additional increments will decline.
Firm A has a strictly higher marginal cost than firm B. They compete in a homogeneous product Bertrand duopoly. Which of the following results will NOT occur?
A. Revenue of firm A < Revenue of firm B B. ProfitA = 0 < ProfitB C. PriceA < PriceB D. QA < QB
Assume a society can produce either beer or wine. If the marginal rate of transformation of gallons of beer into gallons of wine is 0.5, then the opportunity cost of wine is
A. the 2 gallons of wine that must be forgone. B. the additional 0.5 gallons of beer that can be produced. C. the 0.5 gallons of beer that must be forgone. D. the 2 gallons of beer that must be forgone.
The Federal Reserve is blamed by some for the recession of 2007-2009 because it
A. raised interest rates too fast in 2005-2007. B. lowered interest rates too fast in 2008. C. kept interest rates too low prior to 2005 leading to a housing boom (that ultimately went bust). D. kept interest rates high in 2005-2007.