Which of the following is an example of a positive statement?
A) It is too hot to go jogging.
B) Ceteris paribus, a teacher should award a higher grade if you study more hours for an economics test.
C) When the price of an item increases, people respond by reducing their consumption of the item.
D) The government should balance the budget.
Answer: C) When the price of an item increases, people respond by reducing their consumption of the item.
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Firm A is a monopoly because of network effects, whereas Firm B is a natural monopoly. Which of the following statements is likely to be true in this context?
A) The average total costs of both firms decrease as they increase their output. B) The value of the product that both firms produce increases with an increase in the number of buyers. C) Firm A enjoys a monopoly status because its average total cost decreases with increase in output, whereas Firm B enjoys a monopoly status because the value of its product increases as more consumers buy it. D) Firm B enjoys a monopoly status because its average total cost decreases with increase in output, whereas Firm A enjoys a monopoly status because the value of its product increases as more consumers buy it.
A fixed money-supply rule will have the greatest stabilizing effect on output when
A) money demand is unstable and commodity demand is stable. B) both money and commodity demand are unstable. C) both money demand and commodity demand are stable. D) the velocity of money is unstable.
A person who generally drives without a seat belt on does not reveal this to his automobile insurance company before he purchases insurance. This is an example of
A) adverse selection. B) moral hazard. C) signaling. D) screening.
In an economy, the value of inventories rose from $275 billion in 2009 to $300 billion in 2010. In calculating total investment for 2010, national income accountants would increase it by $25 billion.
Answer the following statement true (T) or false (F)