Answer the following questions true (T) or false (F)
1. Economic efficiency is a market outcome in which the marginal benefit to consumers is equal to the marginal cost of production and the sum of consumer surplus and producer surplus is maximized.
2. If marginal benefit is greater than marginal cost, output is inefficiently high.
3. Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.
1. TRUE
2. FALSE
3. TRUE
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Assume the economy is at full employment and prices are reasonably stable. If the government wants to increase spending for public schools, which of the following policies will have the least inflationary impact?
A. An increase in taxes by an amount greater than the increase in spending. B. An increase in taxes equal to the increase in spending. C. An increase in taxes by an amount smaller than the increase in spending. D. No change in taxes when expenditures increase.
As a portion of total assets measured in billions of dollars, the most important asset on the Fed's balance sheet is:
A. gold. B. foreign exchange reserves. C. securities. D. loans.
An increase in the minimum wage will tend to cause which of the following?
A) an upward shift in the WS curve B) a downward shift in the WS curve C) an upward shift in the PS curve D) a downward shift in the PS curve E) none of the above
Which of the following statements regarding a firm's long-run average total cost (LRATC) curve and its short-run average total cost (SRATC) curve is true?
A) The shape of the LRATC is affected by the law of diminishing returns. B) The SRATC, but not the LRATC, can be used by a firm's managers for planning. C) The LRATC shows the lowest cost at which a firm is able to produce a given level of output when no inputs are fixed. D) The contribution of average fixed cost to LRATC is greater than its contribution to SRATC.