John moved his office from a building he was renting downtown to the carriage house he owns in back of his house. How will his profit change?
a. Implicit costs fall.
b. Explicit costs remain unchanged while implicit costs rise.
c. Economic profit must fall.
d. Explicit costs rise.
e. Accounting profit will rise.
E
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Suppose that there is only one small clothing store in the remote village of Green Acres, and until recently the townspeople bought their shirts there. As more people in Green Acres become connected to the Internet, the price elasticity of demand for shirts at the Green Acres store will:
A. increase because the Internet offers more substitutes. B. remain the same, but the quantity demanded will decrease as more people shop online. C. decrease because the Internet offers more substitutes. D. remain the same, but the demand will decrease as more people shop online.
When the Fed raised interest rates between 2004 and 2007, the Federal Reserve:
A. bought U.S. government securities, thereby creating and supplying additional federal funds. B. encouraged banks to loan out funds to ease their reserve requirements and thus lower the demand for federal funds. C. sped up the clearing of checks to make more funds available to banks. D. sold U.S. government securities, thereby contracting the amount of funds available to the federal funds market.
Suppose that an economy's labor productivity and total worker-hours each grew by 3 percent between year 1 and year 2. We could conclude that this economy's:
A. real GDP remained constant. B. capital stock increased by 3 percent. C. production possibilities curve shifted inward. D. production possibilities curve shifted outward.
The size of a deadweight loss in a market is reduced by
A) government legislating a ceiling price. B) government legislating a price floor. C) market price being close to marginal cost. D) creative destruction.