In an economic expansion, people used their charge cards to purchase many goods. Now the economy is in a recession and people must use much of their reduced incomes to pay back debts. If employees manufacturing the goods people used to buy are laid off, they will suffer from:
A. cyclical unemployment.
B. structural unemployment.
C. permanent unemployment.
D. frictional unemployment.
Answer: A
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From any point within the production possibilities frontier,
A) the only way to increase production of one good is to decrease production of the other. B) it is possible to increase both people's utility. C) it is possible to increase output of both goods. D) any move will necessarily decrease production of some good.
Consider a risk-averse individual whose initial situation is a risk-free basket of outcomes. How does this person react when he is offered a wager at favorable odds?
a. He always declines the wager. b. He always accepts the wager. c. He accepts the wager only if it is sufficiently small. d. He accepts the wager only if it is sufficiently large.
Which of the following offers an explanation as to why the principal-agent problem exists for a firm?
a. The firm cares less about profit and more about cost when there are many competitors in the market. b. The firm offers an employee-incentive program in which employees share in the firm's profits. c. The firm operates in a market with many competitors forcing the firm to pay its employees more to keep them from switching to another firm. d. The firm operates to maximize profit while the employees attempt to work as little as possible to earn their paychecks.
Suppose in the city of Smugsburg, Blu-ray disc rental stores operate in a monopolistically competitive market. If the price of Blu-ray disc rentals in Smugsburg is currently equal to $5 per tape and the average cost of renting videos is $1 per Blu-ray disc, in the long run we expect the price of renting Blu-ray discs to:
A. increase. B. stay the same. C. decrease, and the average cost of producing Blu-ray disc rentals to increase. D. decrease, and the average cost of producing Blu-ray disc rentals to decrease.