Suppose two goods are perfect substitutes. The price elasticity of demand of one of the goods is
A) 0.
B) 1.
C) 10.
D) infinity.
Answer: D
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An increase in the government budget deficit will shift the ________ curve for loanable funds to the ________ and the equilibrium real interest rate will ________
A) supply; right; fall B) supply; left; rise C) demand; left; fall D) demand; right; rise
Rational expectations theory suggests that ________
A) policy announcements can impact behavior B) policy announcements have no impact on behavior C) unannounced policies have no impact on behavior D) the optimal forecast is identical to the announced policy
A monopolistically competitive firm in the short run is producing where price is $3.00 and marginal cost is $1.50. To maximize profits:
A. the firm should increase output and decrease price. B. the firm should decrease output and increase price. C. the firm should produce the level of output where marginal revenue equals marginal cost. D. the firm should continue to produce this quantity.
Using the utility-optimizing model, which of the following would induce a consumer to increase consumption of good A, a normal good?
A) an increase in the marginal utility of A B) a decrease in the total utility of B C) an increase in the marginal utility of good B D) a decrease in income