According to the short-run aggregate supply curve, firms are most likely to respond to an increase in aggregate demand by raising:
A. neither production nor prices.
B. prices.
C. both production and prices.
D. production.
Answer: C
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Suppose Cathy and Lewis work in a bakery making pies and cakes. Suppose it takes Cathy 1.5 hours to make a pie and 1 hour to make a cake, and suppose it takes Lewis 2 hours to make a pie and 1.5 hours to make a cake. Which of the following statements is correct?
A. Cathy has a comparative and absolute advantage in pies. B. Cathy has a comparative advantage in pies, and Lewis has an absolute advantage in pies. C. Lewis has a comparative and absolute advantage in pies. D. Lewis has a comparative advantage in pies, and Cathy has an absolute advantage in pies.
Which of the following would be considered an ongoing expense?
A. Employee salaries B. Raw materials C. Advertising D. All of these could be considered ongoing expenses.
The profit-maximizing level of output for a firm occurs at the point at which
A) P = ATC. B) P = AVC. C) MR = MC. D) MR = ATC.
If the target federal funds rate reaches the lower bound:
A. the FOMC would run out of policy options. B. the FOMC would turn to unconventional measures, such as forward guidance. C. monetary policy would no longer be of use. D. the FOMC would simply reset the target.