As the market price of a good rises, businesses will respond by producing more of that good because
A. marginal revenue exceeds marginal cost after the price increase.
B. the rising price causes marginal cost to fall.
C. laws and regulations require them to do so.
D. marginal cost exceeds marginal revenue after the price increase.
Answer: A
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The Ricardian equivalence theorem suggests that an increase in the government budget deficit created by a tax cut will
A) decrease real Gross Domestic Product (GDP) in the short run, but increase it in the long run. B) decrease real Gross Domestic Product (GDP) in both the short and long run. C) increase real Gross Domestic Product (GDP) in both the short and long run. D) have no effect on aggregate demand.
Sarah and Diane are both billing clerks for the local trucking company earning $17,000 per year. Sarah is attending college, plans to graduate in one year and earn $55,000 as an economist
Diane is not in college or undergoing any specialized training and will have the same job next year. According to economic theory, which of the two individuals would tend to have a higher current savings rate? A) Diane B) Sarah C) Both will have the same saving rate. D) Economic theory sheds no light on this question.
Why would you expect the demand for diamond jewelry to fall faster than plastic, costume jewelry when all incomes fall?
What will be an ideal response?
If the U.S. has exports of $1.5 trillion and imports of $2.2 trillion, then the U.S
a. sells more overseas then it buys from overseas; it has a trade deficit. b. sells more overseas then it buys from overseas; it has a trade surplus. c. buys more from overseas then it sells overseas; it has a trade deficit. d. buys more from overseas then it sells overseas; it has a trade surplus.