According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this weekend if:
A. the extra benefits of seeing the movie are greater than the extra costs of seeing the movie.
B. you can afford to go to the movies.
C. the average benefit you get from going to the movies is greater than the average cost of a ticket.
D. you really like Star Wars.
Answer: A
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Making use of an economic model is a process of
A) solving hundreds of simultaneous equations. B) running experiments to determine how changes in the endogenous variables will change the exogenous variables. C) running experiments to determine how changes in the exogenous variables will change the endogenous variables. D) resolving inconsistencies in the actions of economic agents.
Suppose a firm in a perfectly competitive market is operating at its profit-maximizing level of output. Will the firm suspend operations if it faces a reduction in the price it can charge for its product?
a. No, because it can always raise its prices in the short run. b. No, because it can always raise its prices in the long run. c. No, as long as the firm earns sufficient revenue to pay all of the variable costs. d. Yes, since it never makes sense to operate at a loss, even in the short run. e. No, because it always makes sense to operate at a loss, even in the long run.
The more elastic the supply of a product, the more likely that the actual benefit of a subsidy granted of the product will
a. go to sellers. b. go to buyers. c. go equally to both buyers and sellers. d. do none of the above.
If the Consumer Price Index was 120 in one year and 115 in the next year, then the rate of inflation from one year to the next was:
A. positive 4.2 percent. B. negative 5.0 percent. C. negative 4.2 percent. D. positive 5.0 percent.