Suppose the production of cotton causes substantial environmental damage because the pesticides used by cotton farmers often make their way into nearby rivers and streams, and are very harmful to fish and other wildlife. Economists would consider the environmental damage that results from the production of cotton to be a(n):
A. relevant cost of production only if the environmental damage negatively affects other firms.
B. relevant cost of production only if cotton farmers are charged a fine for the damage done.
C. relevant cost of production.
D. implicit cost of production that cotton farmers will take into account when determining their profit-maximizing level of output.
Answer: C
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Economists believe that countries recently suffering hyperinflation have experienced
A) reduced growth. B) increased growth. C) reduced prices. D) lower interest rates.
If there is a sole producer of a good, and he faces no threat of competition, it is likely that:
A. the consumer surplus is greater than in a competitive equilibrium. B. the price is set inefficiently high. C. the price is set below the competitive equilibrium price. D. the market is efficient.
Other things the same, if the money supply rises by 5% and people were expecting it to rise by 2%, then some firms have
a) lower than desired prices, which increases their sales. b) higher than desired prices, which increases their sales. c) higher than desired prices, which depresses their sales. d) lower than desired prices, which depresses their sales.
Before it went bankrupt in 2008, Lehman Brothers investment bank had a leverage ratio of 30 which meant it was:
A. not very leveraged. B. highly leveraged. C. in debt more than it was worth. D. highly hedged.