The state is considering adding a satellite campus to its major university. How can marginal analysis assist, even though the university does not attempt to maximize profits?
What will be an ideal response?
Marginal analysis provides the general rule that something is worth doing as long as marginal benefits exceed marginal costs, and one should stop where marginal benefits equal marginal costs. The state should compare the benefits of providing its citizens with another campus versus the costs associated with any alternative courses of action. If marginal benefits exceed marginal costs, then the state should proceed with the satellite campus plans.
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Which of the following is a New Keynesian explanation of wage and price stickiness must be discounted?
A) overlapping wage contracts B) menu costs C) efficiency wages D) all of the above
In the Keynesian model which includes the Keynesian short-run aggregate supply curve
A) an increase in aggregate demand would causes the price level to rise, but does not change the level of real GDP. B) an increase in aggregate demand causes real GDP to rise without changing the price level. C) an increase in aggregate demand changes neither the price level nor the level of real GDP. D) an increase in aggregate demand causes real GDP and the price level to decrease.
Good A has a price elasticity of demand of .27, while good B has a price elasticity of demand of 2.9 . To raise the most tax revenue, the government should:
a. place a unit tax on good A. b. place a unit tax on good B. c. raise the price elasticity of demand for good A. d. subsidize the production of good B. e. cut its spending for various social programs.
If the actual inflation rate is equal to the expected rate, which of the following will happen?
a. inflationary expectations will increase and the Phillips curve will shift downward in the short run. b. inflationary expectations will not change and the Phillips curve will remain in its current position in the short run. c. inflationary expectations will decrease and the Phillips curve will shift downward in the short run. d. inflationary expectations will stay constant and the Phillips curve will shift downward in the short run. e. inflationary expectations will not change and the Phillips curve will become horizontal in the short run.