The Central Bank of Wiknam decreases the money supply at the same time the Parliament of Wiknam repeals a new investment tax credit. Which of these policies shifts aggregate-demand curve to the left?
a) the investment tax credit repeal but not the money supply decrease
b) the money supply decrease but not the investment tax credit repeal
c) both the money supply decrease and the investment tax credit repeal
d) neither the investment tax credit repeal nor the money supply decrease
Ans: c) both the money supply decrease and the investment tax credit repeal
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Which of the following statements about profit maximizing firms in a competitive market is FALSE?
A) Firms earn no economic profit in the long run. B) Marginal revenue does not have to equal marginal cost. C) p - MC = 0. D) Price equals marginal revenue.
A tit-for-tat strategy is one in which oligopolies
A) cooperate as long as other members cooperate, but if anyone cheats, they cut the price until the cheater reverts to cooperation. B) cooperate almost all of the time, but occasionally do not cooperate in order to fool the antitrust authorities. C) keep cutting prices to punish rivals until the competitive price is reached. D) try to avoid the problems of the prisoners' dilemma, but actually make themselves worse off.
Assuming price elasticity of demand is reported as an absolute value, a price elasticity of one indicates:
A. the percentage change in quantity demanded will equal the percentage change in price. B. the percentage change in quantity demanded will equal one. C. both the percentage change in price and quantity demanded must equal one. D. the percentage change in quantity demanded and the percentage change in price must sum to one.
Over the past twenty years, the number of small family farms has fallen significantly and in their place there are fewer, but larger, farms owned by corporations. Which of the following best explains this trend?
A) diseconomies of scale in farming B) economies of scale in farming C) diminishing returns to labor in farming D) declining productivity