The difference between zero accounting profit and zero economic profit is that
A. an economic profit of zero indicates a fair rate of return because it includes the opportunity cost of a firm’s capital.
B. an economic profit of zero indicates an unacceptable rate of return because it does not include the opportunity cost of a firm’s capital.
C. an economic profit of zero indicates more than a fair rate of return because it includes opportunity cost and explicit cost.
D. an accounting profit of zero indicates a fair rate of return because it includes the opportunity cost of a firm’s capital.
Answer: A
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Suppose that your roommate is very untidy. Suppose she/he gets a $100 benefit from being messy but imposes a $200 cost on you. (Assume that there are no regulations against untidiness in your living quarters.) The Coase Theorem would suggest that an efficient solution can be reached where: a. you pay your roommate at least $100 but no more than $200 to clean up after her/himself b. you pay your
roommate at least $201 to clean up after her/himself. c. you continue to live with your untidy roommate until you are able to make other living arrangements elsewhere. d. your roommate pays you at least $100 to have you clean up after her/him.
The elasticity of supply of a good that is produced in a perfectly competitive industry is close to zero
a. True b. False Indicate whether the statement is true or false
People who spend more time and effort investigating the advantages and disadvantages of different automobile models when they go to purchase one than they do investigating the strengths and weaknesses of presidential candidates are saying, in effect, that
a. a good car is more important to their well-being than a good president. b. they expect to use the information on the merits of alternative cars to greater personal advantage than they could information on the merits of alternative presidential candidates. c. they are irrational, because the choice of a president is obviously far more important than the choice of a car. d. they do not think it matters who is elected president.
In an economy where planned aggregate spending is given by PAE = 3,000 + .75Y ? 10,000r, the central bank is currently setting the interest rate at 0.06 (6 percent). If potential output equals 9,500, the central bank must ________ the interest rate to close the ________ gap.
A. lower; recessionary B. lower; expansionary C. raise; expansionary D. raise; recessionary