Assume a toy company hires an additional worker to assemble toys, and the size of the factory and amount of equipment remain constant. As a result, the level of output increases but by a smaller amount than when the previous additional worker was hired. This is an example of:
a) The law of substitution.
b) Say's Law.
c) The law of diminishing returns.
d) The law of poor planning.
Ans: c) The law of diminishing returns.
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Lesley buys 6 cappuccinos per week when her income is $900 per week and buys 8 cappuccinos per week when her income is $1100 per week. For Lesley, cappuccinos are a(n) ________ good
A) normal B) luxury C) inferior D) essential E) substitute
The quantity of real GDP demanded on the AD curve is the equilibrium real GDP when
A) equilibrium expenditure is greater than real GDP. B) aggregate planned expenditure equals real GDP. C) the price level equals the equilibrium price level. D) aggregate planned expenditure is greater than real GDP. E) aggregate planned expenditure is less than real GDP.
If price changes by one firm induce rival firms selling close substitutes to alter their prices,
A) firms will be able to raise their prices without fear of losing sales. B) the demand curve will shift in response to a change in price. C) the original firm faces an elastic demand curve. D) the original firm faces an inelastic demand curve. E) there is no competition between the rival firms.
If the CPI rises from 206.7 to 212.7 between two consecutive years, by how much has the cost of living changed between these two years?
A) The cost of living has increased by 6%. B) The cost of living has increased by 12.7%. C) The cost of living has decreased by 6%. D) The cost of living has increased by 2.9%.