An economist who follows a functional finance principle believes that the government should:
A. run a balanced budget.
B. do nothing in response to a recession.
C. do nothing in response to a recession due to the Ricardian equivalence theorem.
D. run either a deficit or surplus depending on the state of the economy.
Answer: D
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If a government action is designed to achieve efficiency, then the action must have the market produce the amount of output so that the
A) marginal private cost equals the marginal private benefit. B) marginal social cost equals the marginal social benefit. C) marginal external cost equals the marginal external benefit. D) marginal private cost equals the tax. E) marginal social benefit exceeds the marginal social cost by as much as possible.
Historically, revolutionary inventions and innovations have come from
A. large established companies. B. individuals and small new firms. C. firms with large research and development programs. D. government-sponsored entities.
Which of the following is not held constant along a given supply curve for a good?
A. Taxes. B. The cost of factors of production. C. Technology. D. Price.
In the Primary Metals industry, it is estimated that the elasticity of output with respect to labor is 0.51 and the elasticity of output with respect to capital is 0.73. These two measures indicate that the primary metals industry is characterized by
A) decreasing returns to scale. B) constant returns to scale. C) increasing returns to scale. D) no returns to scale.