Answer the following questions true (T) or false (F)
1. If average product is decreasing, then marginal product must be negative.
2. If a firm experiences diminishing returns its marginal product must be negative.
3. The additional output a firm produces by hiring one more worker is called the marginal product of labor.
1. FALSE
2. FALSE
3. TRUE
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According to Okun's Law, for each 1 percentage point that the unemployment rate is above the natural unemployment rate, then
A) the inflation rate is greater than the expected inflation rate by 2 percentage points. B) real GDP is above potential GDP by 2 percent. C) real GDP is below potential GDP by 2 percent. D) the real interest rate is below the natural real interest rate by 1 percentage point. E) the inflation rate is less than the expected inflation rate by 1 percentage point.
When a person buys a bond of the XYZ Corporation, he or she can expect to
A) pay the corporation a certain amount of money each quarter of the year. B) receive the face value of the bond each year and the face value of the bond when the bond matures. C) receive the coupon rate times the face value of the bond each year and the face value of the bond when the bond matures. D) receive the face value of the bond each year in perpetuity.
Based on the graph showing the effects of an investment tax credit or a technological change, enacting an investment tax credit would ______.
a. create a negative real interest rate
b. have little or no effect on the real interest rate
c. increase the real interest rate
d. decrease the real interest rate
Gasoline stations carrying the same fuel brand (e.g., Chevron) are able to charge different prices in San Francisco because:
A. location is a source for product differentiation. B. gasoline stations are perfect price discriminators. C. gasoline station operators form a cartel to act as a monopoly. D. fuel quality varies across stores.