Ceteris paribus, economic growth involves an:
a) Increase in imports.
b) Expansion of production possibilities.
c) Increase in GDP due to inflation.
d) Increase in GDP due to inflation.
Answer: b) Expansion of production possibilities.
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The nominal exchange rate:
A. is the price of one country's currency stated in units of another country's currency. B. is adjusted once a year and is the price at which goods are traded. C. is the price of a good in one country expressed in units of the same good in another country. D. is fixed by the central banks of countries.
Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:
A. reduce the demand for tacos and increase the demand for soda. B. reduce the demand for soda and increase the demand for tacos. C. increase the demand for both soda and tacos. D. reduce the demand for both soda and tacos.
A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the 6th unit is
A. greater than $20. B. $19. C. also $14. D. $17.
A soybean farmer sells soybeans in a perfectly competitive market and hires labor in a perfectly competitive market. The market price of soybeans is $6 a bushel, the wage rate is $30, the farmer employs eight workers and the marginal product of the eighth worker is 4 bushels. What would you advise this farmer to do?
A. Do nothing because the wage rate and the marginal product of the last worker hired are equal. B. Increase employment because the wage paid is less than the marginal revenue product. C. Reduce employment because the wage paid is more than the marginal revenue product. D. Reduce the product price so that the wage and marginal revenue product will be equal.