If service stations raise the price of gasoline and experience a decrease in demand for automobile tires, then gasoline and tires are:
a. Substitute goods
b. Inferior goods
c. Complementary goods
d. Economic goods
Answer: c. Complementary goods
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Which of the following is likely to happen due to a contractionary monetary policy?
A) An increase in the inflation rate B) An increase in labor supply C) An increase in the federal funds rate D) An increase in labor demand
In the absence of a financial system, the two-period model without taxes predicts that
A) consumption is more volatile that output. B) consumption is as volatile as output. C) consumption is less volatile than output. D) We do not know.
In the short run, a monopolist will always shut down when
a. total cost is greater than total revenue at all output levels b. total variable cost is greater than fixed cost c. total revenue is greater than total variable cost at all output levels d. fixed cost is greater than total revenue at all output levels e. total variable cost is greater than total revenue at all output levels
Suppose that a firm uses both labor (L) and capital (K) as inputs. The firm's long-run production function is Q = F(L,K) = 5?L?K. The firm has 100 units of capital. If the firm uses an efficient production method, how much output does it produce in the short run if it hires 25 workers?
A. 250 units B. 1,250 units C. 2,500 units D. 50 units