If the law of increasing opportunity cost holds, can the production possibility frontier be a straight line?
What will be an ideal response?
No. If the production possibility curve is a straight line, this would imply that the marginal rate of transformation is constant. This cannot be the case if the law of increasing opportunity costs holds.
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How does slow price adjustment, as assumed in Keynesian models, result in real economic variables being affected by nominal variables?
What will be an ideal response?
Which of the following could lead to a bank's failure, even if the bank has positive net worth?
a. The bank may encounter difficulty selling its government bonds. b. Most of the bank's liabilities are illiquid. c. A bank with positive net worth cannot fail. d. The bank may encounter difficulty borrowing reserves from the Federal Reserve. e. Most of the bank's assets are illiquid.
A monopoly is most likely to emerge in a market when
a. the producers in the market have U-shaped average total cost curves. b. the price elasticity of demand for the product is high. c. the cost of entry and exit into the market is low. d. economies of scale are large relative to market demand.
The demand for grape-flavored Hubba Bubba bubble gum is likely
a. inelastic because there are many close substitutes for grape-flavored Hubba Bubba . b. elastic because there are many close substitutes for grape-flavored Hubba Bubba. c. inelastic because the market is broadly defined. d. elastic because the market is broadly defined.