The economic efficiency rule requires production of the quantity of output where:
a. profit is maximized
b. marginal social benefit is maximized
c. marginal social benefit equals marginal social cost
d. the excess of marginal social benefit over marginal social cost is maximized
Ans: c. marginal social benefit equals marginal social cost
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It is usually assumed that a perfectly competitive firm's supply curve is given by its marginal cost curve. In order for this to be true, which of the following additional assumptions are necessary? I. That the firm seek to maximize profits. II. That the marginal cost curve be positively sloped. III. That price exceeds average variable cost. IV. That price exceeds average total cost
a. All of the above. b. I and II but not III and IV. c. I and III but not II and IV. d. I and II only. e. I, II and III, but not IV.
A metal-stamping factory moves next to a day care center. Noise from the factory makes it impossible for the kids to nap. What would be the optimal solution to this problem?
a. The factory should move. b. The day care center should move. c. The factory should install sound insulation. d. The day care center should install sound insulation. e. We cannot determine the solution without more information.
Monetary policy affects real GDP by.
A. Changing aggregate supply B. Creating budget surpluses C. Changing aggregate demand D. Creating budget deficit
If M = the quantity of money, m, the money multiplier, MB, the Monetary Base, C = Currency, D = Deposits, R = Reserves, RR = required reserves, and ER = Excess reserves, then C + R would equal:
A. ER. B. MB. C. R. D. M.