If the AC curve in the above graph represents the minimum of the average total cost curve, then examples of X-inefficiency would best be represented by point:
A. A at output level Q1 and point B at output level Q2.
B. E at output level Q2 and point F at output level Q3.
C. A at output level Q1 and point D at output level Q1.
D. D at output level Q1 and point C at output level Q3.
Answer: B
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A reduction of the discount rate by the Federal Reserve Banks has the direct effect of
A) making it less costly for commercial banks to borrow from the Fed. B) making it more costly for the Treasury to finance deficits. C) increasing commercial bank reserves. D) increasing the stock of money. E) doing all of the above.
Assume that with existing tax and spending laws, government spending exceeds government tax revenues. To cover the resulting shortfall, the government must:
A) increase consumers' incomes. B) print more money. C) Borrow money in the financial markets. D) lower interest rates.
Both parties gain in a voluntary exchange.
Answer the following statement true (T) or false (F)
Suppose the fixed cost of building a nuclear power plant is $1 billion. Suppose also that the only variable cost is the labor of Homer Simpson, and he earns $10 per hour. If the plant generates 1,000 kilowatts each hour, and has already generated 1 billion kilowatts, what can you say about the marginal cost of the next kilowatt?
a. The marginal cost is equal to $10 . b. The marginal cost is equal to $.01. c. The marginal cost is equal to $1.01. d. The marginal cost is rising. e. The marginal cost is falling.