One baseline assumption that economists make about consumer behavior is that:
A. people are rational utility maximizers.
B. people will always choose short-term benefits to longer-term payoffs.
C. people will always choose what makes them happiest.
D. people are unpredictable.
A. people are rational utility maximizers.
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
Which of the following statements correctly describes a perfectly competitive market?
A) In a perfectly competitive market, individual sellers and buyers can influence the market price. B) All participants in a perfectly competitive market are price takers. C) Haggling and bargaining is commonly observed in a perfectly competitive market. D) Buyers in a perfectly competitive market pay different prices according to their individual demand.
For a linear demand function, Q = a + bP +cM + dPR , the income elasticity is
A. -c. B. c. C. c(M/Q). D. c(Q/M). E. -c(Q/PR).
If marginal product is greater than average product, then
A) average product must be decreasing. B) marginal product must be decreasing. C) marginal product must be increasing. D) marginal product could either be increasing or decreasing.