Draw a graph of the firm's demand, marginal revenue, marginal cost, and average total cost curves.
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When the AE line lies above the 45° line,
A) real GDP exceeds aggregate planned expenditure. B) there are unplanned increases in inventories. C) aggregate planned expenditure is less than real GDP. D) the price level is rising. E) there are unplanned decreases in inventories.
Suppose the price level decreases and real GDP remains the same. Then
A) nominal GDP must decrease. B) nominal GDP must remain unchanged. C) nominal GDP must increase. D) none of the above are true.
A major function of incentive payments, guarantees, and signals is to enable markets to overcome the problem of
A) irrational forecasting. B) efficient forecasting. C) private information. D) public information.
Assume that the budget constraint in the figure below is: P E E + P A A = I, where I is total income and P E is the price of education and P A is the price of all other goods. If U(E,A) = A + E, P E = 2, P A = 1, and I = 10. What is the quantity of education and all other goods consumed?
