Give an example of how someone might respond predictably to an incentive.
What will be an ideal response?
A sample answer follows. Most people seek opportunities to make themselves better off, so they respond in predictable ways to both positive and negative incentives. For example, the government offers a positive incentive for people to be homeowners by allowing mortgage interest to be a tax deduction. This reduces homeowners’ taxes, making home ownership more affordable, so people who might otherwise rent a place to live are more likely to buy, and home ownership increases.
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Investment spending ________
A) is comprised of fixed and inventory investment B) is negatively related to the real interest rate C) is heavily influenced by what Keynes coined as "animal spirits" D) all of the above E) none of the above
Which of the following is an implication of the random walk theory?
a. Experts will be able to make money by picking and choosing the best stocks. b. There is a systematic pattern to the movement of prices in the stock market. c. Stock market investors can expect to earn a fairly steady real rate of return of about 7 percent annually. d. Even experts will be unable to predict the future movement of stock prices with any degree of accuracy.
If Utopia opened itself to trade it would
A. export 100 cases of tile per year. B. export 450 cases of tile per year. C. import 250 cases of tile per year. D. import 150 cases of tile per year.
A natural monopoly
A. exists only when it is regulated. B. always experiences diseconomies of scale. C. has one lowest-cost producer in the industry. D. has no market demand in the long run.