Why does a downward-sloping Phillips curve imply a positive sacrifice ratio?
A downward-sloping Phillips curve implies that as a government acts to decrease inflation, unemployment increases. Increased unemployment leads to lower output. So the Phillips curve implies that inflation reduction requires a short-run decrease in output, as does a positive sacrifice ratio.
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Economists develop models to
A) capture every detail of the real world. B) make their arguments more realistic. C) justify the assumptions they make about people's behavior. D) help us understand economic phenomena in the real world.
Having free entry and exit in a market can help drive:
A. innovation. B. cost-cutting. C. quality improvements. D. All of these occur more often with free entry and exit.
If there are both external benefits and external costs associated with the production and consumption of a good, and the external benefits are greater than the external costs,
a. Taxing it could bring us closer to the efficient solution b. Subsidizing it could bring us closer to the efficient solution c. Neither a tax or a subsidy could bring us closer to the efficient solution d. None of the above is true.
Matt estimates the marginal benefit of eating one slice of pizza at $3. The marginal benefit of the 2nd slice is $2, the marginal benefit of the third slice is $1, and the marginal benefit of the 4th slice is $0. If the price is $1.50 per slice, to maximize his net benefit Matt should eat:
a. "1 slice." b. 2 slices. c. 3 slices. d. 4 slices.