A student makes the following argument: "When a market is in equilibrium, there is no consumer surplus. We know this because in equilibrium, the market prices is equal to the price consumers are willing to pay for the good. Briefly explain whether you agree with the student's argument.
Answer: The student is incorrect because the price consumers are willing to pay and the market price are only equal for the last unit consumed.
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The federal government debt ________ when the federal government runs a deficit and ________ when the federal government runs a surplus
A) increases; increases B) decreases; decreases C) increases; decreases D) decreases; increases
Tina's marginal utility of her first piece of cake is 15, while Jerry's marginal utility of his first piece of cake is 24 . An economist would conclude that:
a. Tina likes cake more than Jerry likes cake. b. Jerry likes cake more than Tina likes cake. c. Tina likes cake less than Jerry likes cake. d. Jerry likes cake less than Tina likes cake. e. we can't make a comparison to see who values cake more.
If the simple spending multiplier is 10, the marginal propensity to save (MPS) is:
a. 1/10. b. 9/10. c. 1/9 d. 10/9. e. 9.
If the inflation rate during a particular year is 2 percent, then the real interest rate that a lender will receive from a loan that promises a nominal interest rate of 10 percent is _____
a. 12 percent b. 8 percent c. 10 percent d. 2 percent