To be useful, a model must
A. have assumptions that have been verified by empirical testing.
B. predict accurately all of the time.
C. predict more accurately than other models that have been developed.
D. predict the behavior of every individual.
Answer: C
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Markets tend to underallocate resources to the production of a good when
A) there are negative externalities. B) there are positive externalities. C) there are public goods produced. D) equilibrium occurs.
If the price elasticity of demand is 0.5, this means that a ________ increase in price causes a ________ decrease in quantity demanded.
A. 20%; 100% B. 30%; 15% C. 20%; 1% D. 5%; 1%
According to the No Marginal Improvement Principle, if X* is the best choice then at X* it must always be true that:
A. either MB = MC or the activity X is not finely divisible. B. either MB ? MC or the activity X is not finely divisible. C. either MB < MC or MB > MC. D. MB = MC.
A firm's ______ are costs that are incurred even if there is no output. In the short run, these costs _____ as production increases.
A. fixed costs; increase B. fixed costs; do not change C. variable costs; increase D. variable costs; do not change