The rule for efficient output selection is stated as MC = MU. Explain how the rule results in economic efficiency.
What will be an ideal response?
Efficiency in output selection requires that, for each of the economy’s outputs, the marginal cost of the last unit produced be equal to the marginal utility of the last unit consumed. (Monetary terms may be used to make the measurement easier.) The goal of the output decision is to maximize the total benefit (or total utility) to society, minus the cost to society of producing the output. Maximizing the difference between total utility and total cost can also be accomplished by equating MU and MC.
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If the price level rises relative to the money wage rate, firms ________ the quantity of labor they demand and workers ________ the quantity of labor they supply
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
With money supply shocks in the intertemporal model with money, the price level is
A) procyclical. B) acyclical. C) countercyclical. D) somewhat cyclical.
In the United States, the recovery rate for plastic wastes
a. has been declining as the use of plastics has been decreasing over time b. has been rising because of low-cost methods for sorting by resin content c. is waning because of the absence of lucrative markets for all recycled plastics d. is generally low because of costly steps in the plastic recycling process
Use the following graph to answer the next question.
If the federal funds market is at equilibrium at point B and the Federal Reserve decides to change the rate by a percentage point in order to reduce the chances of the economy going into recession, the supply of funds curve will have to shift to ________.
A. Sf1 B. Sf2 C. Sf3 D. Sf4