The reason economists create a market basket is to:
A. track its changing prices to reflect changes in purchasing patterns of firms.
B. see how the cost of buying the goods and services on the list changes over time.
C. know how each individual consumer is being affected by changing prices.
D. get a sense of how people buy items on a weekly basis.
B. see how the cost of buying the goods and services on the list changes over time.
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Refer to Scenario 10.3. Suppose that a tax of $5 per unit of output is imposed on red herring producers. The price of red herring will
A) not change. B) increase by less than $5. C) increase by $5. D) increase by more than $5. E) decrease.
If a firm's marginal revenue is greater than its marginal cost, then:
a. each added unit of output will reduce profits. b. the firm is maximizing profit. c. an increase in output will add more to revenue than to cost. d. an increase in output will add more to cost than to revenue. e. a fall in output will add more to revenue than to cost.
Some economists believe that policy makers should avoid stabilization policy because
a. lags make the policy impact unpredictable. b. no tax cut ever stimulated demand. c. stabilization policies are rarely signed into law. d. it never works.
What are transfer payments, and how do they affect the calculation of GDP?