In order to pay for services such as health care, education, and highways, governments
A) collect taxes
B) sell tools and machinery to the business sector
C) rely fully on donations from the population
Answer: A) collect taxes
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If the inflation premium is 3% and the real interest on a loan is 4%, then the nominal interest rate is
A. 0.75%. B. 1%. C. -1%. D. 7%.
You are playing a game in which a dollar bill is auctioned. The highest bidder receives the dollar in return for the amount bid. However, the second-highest bidder must pay the amount that he or she bids, and gets nothing in return
The optimal strategy is: A) to bid the smallest allowable increment below $1. B) to bid nothing. C) to bid $0.99. D) to bid more than a dollar.
In a market of monopolistic competition, there will be
a. a kink in the demand curves for the output of the individual sellers. b. product differentiation. c. a substantial substitution effect whenever any one firm changes its price. d. All of these.
An economy can produce various combinations of food and shelter along a production possibilities curve (PPC). We first increase the production of shelter along the PPC. If we then continue to shift more and more production to shelter, then which of the following will most likely happen to the opportunity cost of a unit of shelter?
a. Opportunity cost must stay constant if we are to stay on the production possibilities curve. b. Opportunity cost will increase because as more and more shelter is produced, labor and capital that is highly productive at producing food is being shifted to shelter production, and so more and more food is being given up to produce a unit of shelter. c. Opportunity cost includes all options given up to produce shelter. d. Opportunity cost is the amount of labor (but not capital) that is used to produce the extra shelter.