Does minimizing average total costs ensure that a firm is maximizing its profits?
No. To maximize profits a firm should produce the output level where MR = MC. It is possible that this
will not coincide with the minimum point on the average total cost curve.
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Assuming all else equal, if the labor demand curve shifts to the left and the labor supply curve remains unchanged, ________
A) equilibrium wage falls B) consumption falls C) unemployment rises D) equilibrium wage rises
Suppose initially the federal budget is balanced. The economy then enters a period of expansion. What is likely to happen to the federal budget?
A) It will remain balanced. B) It will show a deficit. C) It will automatically stabilize. D) It will show a surplus.
To achieve long-run equilibrium in an economy with a recessionary gap, without the use of stabilization policy, the inflation rate must:
A. not change. B. increase. C. decrease. D. either increase or decrease depending on the relative shifts of AD and AS.
If an economy is fully utilizing its resources, it can produce more of one product only if it
A) produces less of another product. B) reduces the prices of the most expensive products. C) adds more people to the labor force. D) doubles manufacturing of the product.