The slope of the budget constraint:
A) changes as the marginal rate of substitution changes.
B) is the ratio of the prices of the two goods.
C) is the ratio of the budget to total utility.
D) equals one, since the consumer can purchase any combination along the budget constraint.
B
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A manufacturer of grenade launchers estimates that the probability of a fatal accident caused by the design of its product is 1/80,000 and the value of a life lost is $2 million
The manufacturer can change the design to eliminate that chance for $20 per grenade launcher and is prepared to incorporate all cost-justified precautions. Will the manufacturer change the design? What would the benevolent social planner think about the manufacturer's decision if the true value of a life is actually $1.5 million?
Holding other things constant, if the US dollar depreciates, it makes the US exports
a. Less attractive to foreigners b. More attractive to foreigners c. Neither more nor less attractive to foreigners d. None of the above
A monopolist will
A. always charge a price higher than average cost. B. always charge a price higher than marginal cost. C. always produce a level of output at which marginal revenue equals marginal cost. D. both b and c E. all of the above
The diagram below shows the production possibilities frontier (PPF) for a country that produces guns (G) and butter (B). Most people in the country prefer guns, so in the absence of international trade, point A represents the combination of G and B that maximizes welfare. The slope of the PPF at point A is equal to -2. 
Over the long run, do you think this country would be better off by shifting its production towards guns or butter? Please identify the most efficient production point in the PPF with trade. What would be the ratio of the prices at that point?
What will be an ideal response?