What is the relationship between accounting and economic profits?
A) Accounting profits are always larger than economic profits.
B) Economic profits are always larger than accounting profits.
C) There is no relationship between economic and accounting profits.
D) Economic profits are always negative.
Answer: A
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The observation that goods and services flow in one direction and money payments flow in another direction is the principle behind
A) a barter economy. B) the circular flow of income. C) a pure command economy. D) the double coincidence of wants.
In the balance of payments accounts, a net importer of capital is a nation that
a. sells more goods in foreign countries than it imports b. buys more goods from foreign countries than it exports c. sells more assets to individuals in other countries than the assets it buys from them d. buys more assets from individuals in other countries than the assets it sells to them e. imports less machinery than it exports
Given an initial deposit (ID) and a legal reserve requirement (LRR), the amount of money potentially created by the banking system is
a. LRR/ID b. ID/LRR c. ID/LRR - ID d. ID/LRR + ID e. None of the above
Suppose the marginal rate of technical substitution for labor with capital is 5, the marginal product of labor is 8, and the marginal product of capital is 4. Assuming the law of diminishing marginal product applies to both labor and capital, this firm:
A. is minimizing the cost of producing its output. B. could reduce costs by using fewer workers and more capital. C. could reduce costs by using less capital and more workers. D. could reduce the cost of producing the output by reducing workers and capital by the same proportion.