Marginal analysis of a 'one thing' decision
What will be an ideal response?
- Look at expected or estimated MB's and MC's of doing it
- If MB > MC - DO IT
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Refer to the above graph. Assume that the economy initially has a price level of P2 and output level Q2. The price level is flexible and the government decides to adopt a contractionary fiscal policy. What would most likely be the new equilibrium price level and output?
A. P2 and Q2 B. P1 and Q1 C. P2 and Q4 D. P1 and Q3
Describe how delays can prevent economic policy from being successful.
What will be an ideal response?
A decrease in the price of spaghetti noodles is likely to cause:
A. an increase in the demand for penne pasta due to a change in the price of a complementary good. B. a decrease in the demand for penne pasta due to a change in the price of a complementary good. C. a decrease in the demand for penne pasta due to a change in the price of a substitute good. D. an increase in the demand for penne pasta due to a change in the price of a substitute good.
An argument has been made that the shrinking deficits of the 1990s were attributable to the
A. bailout of the savings and loans. B. Gulf War. C. peace dividend that resulted from the end of the Cold War. D. Cold War.