Many economists believe that the federal government:
A. spends far too much on basic scientific research, as this activity should be reserved for the
private sector.
B. should spend more on basic scientific research because scientific knowledge is a public
good with significant positive externalities.
C. should conduct all R&D activity in the economy, limiting firms' ability to gain monopoly
power through product innovation.
D. should finance more consumption through Social Security and Medicare so that the
increased demand encourages greater R&D.
Answer: B
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Tom spends all his income on comics and cola and maximizes his total utility. If the price of a comic is $4 and the price of a can of cola is $1, then the ratio of the ________ is 4
A) marginal utility from cola to the marginal utility from comics B) marginal utility from comics to the marginal utility from cola C) number of comics Tom buys to the number of cola Tom buys D) total utility from comics to the total utility from cola
Turning points in business cycles occur when
A) a new business cycle is initiated at the trough. B) the economy hits the peak or trough in the business cycle. C) the business cycle begins to follow a new pattern that differs from previous business cycles. D) a new business cycle is initiated at the peak.
An unanticipated decline in investment demand within the new classical model will cause
a. the price level to fall with no effect on output. b. output to fall with no effect on the price level. c. both the price level and output to fall. d. no change in either the level of price or output.
Based on the circular flow model, money flows from households to businesses in:
a. factor markets. b. product markets. c. neither factor nor product markets. d. both factor and product markets.