Firms maximize profits when marginal revenue equals marginal cost
Indicate whether the statement is true or false
True
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During an economic downturn, Keynes argued that firms would have ________ to increase spending because ________.
A. no incentive; interest rates would be too high. B. no incentive; they already had enough capacity to meet demand. C. a strong incentive; interest rates would be too high. D. a strong incentive; they wouldn't have enough capacity to meet demand.
The Coase Theorem implies that the reason people sue each other in court is that transactions costs are too high.
Answer the following statement true (T) or false (F)
If many people were to suddenly deposit into their checking accounts large sums of cash previously held in their homes and/or wallets, and there were no offsetting actions by the Fed or change in institutional policies, this would
a. decrease the M1 money supply but increase the M2 money supply. b. increase the excess reserves of banks and expand the money supply if these reserves are used to make additional loans. c. reduce the excess reserves of banks and indirectly decrease the M1 money supply. d. reduce the excess reserves of banks and indirectly increase the M1 money supply.
When the IMF provides loans to developing countries, it often requires these countries to adopt:
A. a contractionary fiscal policy and an expansionary monetary policy. B. contractionary monetary and fiscal policies. C. expansionary monetary and fiscal policies. D. a contractionary monetary policy and an expansionary fiscal policy.