Consider a society consisting of just a farmer and a tailor. The farmer has 10 units of food but no clothing. The tailor has 40 units of clothing but no food. Suppose each has the utility function U = F1/2C1/2
If the price of clothing is always $1, and the food price is currently $3, then we can conclude A) the market is at a competitive equilibrium.
B) the price of food will drop towards a competitive equilibrium.
C) the price of food will increase towards a competitive equilibrium.
D) None of the above.
C
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If the MPC = 0.8, and planned autonomous investment increases by $80 billion, then equilibrium real GDP will increase by
A) $320 billion. B) $80 billion. C) $400 billion. D) $64 billion.
Labor demand is more elastic the greater the elasticity of substitution between labor and capital because
A. a firm's technology is slow to change. B. firms always have the option of substituting capital for labor. C. the firm's output price falls when the firm produces more output. D. a firm is less willing to pay higher labor costs if it is easy for the firm to substitute capital for labor. E. workers supply more labor when their wage increases.
Because pollution taxes raise production costs, the ________ curve ________.
A. supply; shifts to the right B. supply; shifts to the left C. supply; does not change D. demand; shifts to the right
Based on the figure below. Starting from long-run equilibrium at point C, a tax increase that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies.
A. D; C B. D; B C. A; B D. B; C