Which of the following is an element of a command economy?
A. Production decisions are centralized.
B. The market decides what will be produced.
C. The means of production are privately owned.
D. The market decides distribution.
Answer: A
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Labor productivity rises
A) if the amount of capital per worker increases. B) in the absence of technological progress. C) if firms invest in hiring more workers rather than buying more capital. D) if the amount of capital per worker decreases.
Fiscal policy may end up being destabilizing to an economy because
A) there is never a long enough time lag. B) the economy is almost always at full employment. C) the President may have different goals than Congress. D) various time lags associated with fiscal policy cause the policy changes to take effect too late to solve the problem it was supposed to solve.
A firm is currently producing at the point where MC = MR. The situation for the firm at this point is P = $5, Q = 100, ATC = $6, AVC = $5.50. What do you recommend this firm do?
A) Increase production above the current output rate, because MC = MR at this rate of output. B) Continue to produce the current output rate, because P > AVC. C) Shut down, because AVC > P. D) Shut down, because ATC > P.
Other things constant, the price elasticity of demand for a product will be smaller (more inelastic) if:
a. people spend a large share of their income on the product. b. people spend an insignificant share of their income on the product. c. the population in the market area is large. d. there are many good substitutes for the product.