Historical evidence for the U.S. economy indicates that changes in investment over the business cycle are the biggest cause of changes in
a) profits.
b) real GDP.
c) consumer spending.
d) auto sales.
Answer: b) real GDP.
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According to the Cost-Benefit Principle, you should go see the latest Star Wars movie with your friends this week-end if:
A. the benefits of seeing the movie are greater than the costs of seeing the movie. B. you have a free ticket. C. you can afford to go to the movies. D. you really like Star Wars.
Suppose a jar of orange marmalade that is ultimately sold to a customer at The Corner Store is produced by the following production process: Name of CompanyRevenuesCost of Purchased inputsCitrus Growers Inc.$0.750Florida Jam Company$2.00$.75The Corner Store$2.50$2.00What is the sum of the value added of all the firms?
A. $4.50 B. $2.50 C. $5.25 D. $2.75
In a monopolistically competitive market, social welfare would be enhanced if
a. price equaled marginal cost. b. government regulation eliminated the product-variety externality. c. the government raised taxes to subsidize firms that price below average total cost. d. there were fewer firms, making the industry closer to an oligopoly.
Use the above figure. Suppose that a regulatory agency requires this natural monopolist to engage in marginal cost pricing. This would lead to
A. profits, but new firms cannot enter the industry in the long run due to high barriers to entry. B. losses, which would drive the monopolist out of business in the long run. C. profits, which would encourage new producers to enter the industry in the long run. D. losses, which would encourage the monopolist to lower costs in the long run.