When two goods are perfect substitutes, the marginal rate of substitution
a. decreases as the scarcity of one good increases.
b. is constant along the indifference curve.
c. changes to reflect the consumer’s changing preferences for the goods.
d. increases as the scarcity of one good increases.
b. is constant along the indifference curve.
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Inflation reduces economic efficiency because it does each of the following except:
A. Obscure information transmitted by prices. B. Distort incentives through interaction with the tax laws. C. Change relative prices. D. Induce people to minimize cash holdings.
An increase in the wage rate will have a greater effect on average costs:
a. the larger the proportion labor costs are of total costs and the easier it is to substitute capital for labor. b. the larger the proportion labor costs are of total costs and the harder it is to substitute capital for labor. c. the greater is the diminishing marginal product of labor. d. the greater are returns to scale.
Charging different prices to different customers for the same good or service is known as
a. monopoly b. price setting c. competition d. price discrimination e. rent seeking
Which is regarded as an automatic stabilizer in the economy?
A. Exchange rates B. Interest rates C. The inflation rate D. The progressive income tax