When the housing bubble popped, the effect of the negative demand side shock and the negative supply side shock were the same on:
A. output, causing it to definitely decrease.
B. prices, causing them to definitely rise.
C. output, causing it to definitely increase.
D. prices, causing them to definitely fall.
Answer: A
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The figure above shows the production possibilities frontier for a country. In order for it to move from producing at point A to producing at point B, the country would need to incur an opportunity cost of
A) 4 million SUVs. B) 3 million SUVs. C) 1 million SUVs. D) 3 million compact cars. E) 0 because the gain in compact cars exceeds the loss in SUVs.
At Olive’s Oranges customers may pick oranges from a 100-tree orchard at the price of 15¢ per orange. Olive’s orchard currently produces 8,000 oranges annually. Olive estimates that installing a new irrigation system would increase her annual yield by 200 oranges, beginning next year. The irrigation system requires an immediate cost of $600.
(i) Calculate the marginal product of capital for the irrigation system. Express your answer as a percentage of the cost of the capital. (ii) Suppose the interest rate is 4%. Should Olive invest in the irrigation system? Why or why not? (iii) Repeat part ii for an interest rate of 8%.
A(n) _______ does not pose the problem of scarcity; one use of the good is not an alternative to another use.
A) free good B) scarce good C) economic good D) monetary good
Suppose the demand function for a good is expressed as Q = 100 - 4p. If the good currently sells for $10, then the price elasticity of demand equals
A) -1.5. B) -0.67. C) -4. D) -2.5.