Which of the following is true?
A. The production possibilities curve indicates that it will be impossible to expand total output with the passage of time.
B. As long as resources are scarce, output cannot be increased.
C. The size of the economic pie is fixed, and therefore, if one individual has more income, others must have less.
D. Over time, the output of goods and services can be increased through human ingenuity and discovery of better ways of doing things.
Answer: D
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A monopolistic competitor produces 100 units of a good at a per-unit cost of $22. If it charges a price of $19 per unit of the good, it will ________
A) earn zero economic profits in the short run B) incur a loss of $300 in the short run C) earn a profit of $1,900 in the short run D) incur a loss of $100 in the short run
Refer to Figure 3-5. In a free market such as that depicted above, a shortage is eliminated by
A) a price decrease, decreasing the supply and increasing the demand. B) a price increase, increasing the quantity supplied and decreasing the quantity demanded. C) a price increase, increasing the supply and decreasing the demand. D) a price decrease, decreasing the quantity supplied and increasing the quantity demanded.
Most economists reject the theory of rational expectations because
a. expectations adjust very quickly. b. workers receive wage increases in advance of inflation. c. the short-run aggregate supply curve is vertical. d. labor contracts tend to embody past inflation rates.
A recent outbreak of hepatitis was linked to a national fast-food restaurant chain. This is an example of a case in which
a. brand name identity increases the effectiveness of markets. b. brand name identity can be detrimental to the profitability of a firm. c. advertising is ineffective in salvaging perceptions of product quality. d. advertising cannot be used to establish brand loyalty.