A firm produces a good and generates $6 million in receipts. Wages are $1 million, rent is $500,000, and interest payments are $1 million. Then
A. profits are $3.5 million, the cost of production is $6 million, and households receive income equal to $6 million.
B. profits are $500,000, the cost of production is $5 million, and households receive income equal to $4.5 million.
C. profits are $1.5 million, the cost of production is $6 million, and households receive income equal to $2.5 million.
D. profits are $500,000, the cost of production is $2.5 million, and households receive income equal to $4.5 million.
Answer: A
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The multiplier effect refers to the series of
A) induced increases in consumption spending that result from an initial increase in autonomous expenditures. B) autonomous increases in consumption spending that result from an initial increase in induced expenditures. C) induced increases in investment spending that result from an initial increase in autonomous expenditures. D) autonomous increases in investment spending that result from an initial increase in induced expenditures.
Refer to Figure 13-7. Which of the following statements describes the best course of action for the firm depicted in the diagram?
A) The firm should exit the industry because its price is less than its average total cost. B) The firm should minimize its losses by producing Qy units and charging a price of P0. C) The firm should minimize its losses by producing Qy units and charging a price of P1. D) The firm should minimize its losses by producing Qy units and charging a price of P2.
When government spending is equal to the tax revenues during a specific time period, this is known as a
A. government budget deficit. B. government budget surplus. C. balanced budget. D. public debt.
Critics of unions tend to focus on the fact that unions
A) tend to generate higher wages. B) reduce profits. C) are politically active. D) engage in restrictive labor practices.