What are signals? How do profits function as signals?
What will be an ideal response?
Signals are compact ways of conveying to economic decision makers information needed to make decisions. A signal not only conveys information, but also provides the incentive to react appropriately. Economic profits are such signals because they indicate to entrepreneurs where they should operate and provide the incentive in that the entrepreneurs' incomes are increased when they respond to the signals.
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As more of an activity is undertaken, it is reasonable to assume that
a. the total benefits will decline. b. the marginal benefits will decline. c. the fixed costs will decline. d. the marginal benefits will increase.
The production possibilities curve shows that:
a. some of one good must be given up to get more of another good in an economy that is operating efficiently. b. no output combination is impossible. c. an economy that is operating efficiently can have more of one good without giving up some of another good. d. scarcity can be eliminated.
GDP can be calculated by summing up the "value added" at every stage of production.
Answer the following statement true (T) or false (F)
If average labor productivity decreases while population and the number of employed workers remain constant, then output per person:
A. may increase or decrease. B. decreases. C. increases. D. remains constant.