Which of the following statements is true?
A. The higher the marginal cost, the lower the profit-maximizing price.
B. The more elastic the demand, the higher the profit-maximizing markup.
C. The more elastic the demand, the lower the profit-maximizing markup.
D. The higher the average cost, the lower the profit-maximizing price.
Answer: C
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The “law” of diminishing returns is also referred to as
A. the “law” of diminishing returns to scale. B. the “law” of variable input proportions. C. diminishing average physical product. D. the “law” of decreasing cost.
Consumers have been buying fewer CDs as downloadable music has become easier to purchase and use. We would represent this as
A) a leftward shift of the demand curve for CDs. B) a rightward shift of the demand curve for CDs. C) a change in the price of CDs. D) a leftward shift of the supply curve for downloadable music.
The simple quantity theory of money predicts that an increase in M of 5 percent will lead to
A) an increase in P of 5 percent. B) an increase in P of less than 5 percent. C) an increase in P of more than 5 percent. D) a decrease in P of 5 percent. E) a decrease in P of more than 5 percent.
Fiscal policy does not have an effect on interest rates
Indicate whether the statement is true or false