With a price floor:
A. producer surplus will increase if profits increase.
B. producer surplus will increase is profits fall.
C. producer surplus will decrease if profits increase.
D. producer surplus always decreases.
A. producer surplus will increase if profits increase.
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The use of government taxes and spending to alter economic outcomes is known as
A. Foreign trade policy. B. Monetary policy. C. Incomes policy. D. Fiscal policy.
Assume that a perfectly competitive firm faces a fixed wage rate of $4 and a constant per-unit cost of capital of $2. If the marginal product of labor and capital are 16 and 6, respectively, then to maximize profits the firm should
A) use relatively more labor. B) use relatively less labor. C) increase all inputs proportionately. D) decrease all inputs proportionately.
In the principal-agent problem, the principal is:
A. a person who is the source of the problem. B. a person who carries out a task on someone else's behalf. C. a person who entrusts someone with performing a task. D. a person who is in charge of an educational system.
The United States is experiencing a recession and Congress decides to adopt an expansionary fiscal policy to stimulate the economy. In this case, the crowding-out effect suggests that investment spending would:
A. decrease, thus decreasing aggregate demand and partially offsetting the fiscal policy. B. increase, thus decreasing aggregate demand and partially offsetting the fiscal policy. C. increase, thus increasing aggregate demand and partially reinforcing the fiscal policy. D. decrease, thus increasing aggregate demand and partially offsetting the fiscal policy.