Although economic science can contribute theoretical and factual knowledge on a particular issue, the final decision on policy questions often depends on
A. information that is not currently available.
B. social judgments.
C. ethical norms.
D. All of these responses are correct.
Answer: D
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Figure 9.1 shows three aggregate demand curves. A movement from curve AD2 to curve AD1 could be caused by a(n)
A) increase in the price level. B) increase in government spending. C) increase in the money supply. D) increase in taxes.
Inflation decreases the growth of capital because
i. when the after-tax real interest rate falls, savings decreases. ii. velocity increases when inflation increases. iii. the higher the inflation rate, the higher is the true income tax rate on income from capital. A) i only B) ii only C) iii only D) i and iii E) i, ii, and iii
Which of the following models results in the greatest deadweight loss assuming a fixed number of firms with identical costs and a given demand curve?
A) Cournot B) Stackelberg C) Monopoly D) Perfect competition
In the long run, a competitive firm has a marginal product of labor, MPL = L-1. The output price is $20 per unit and the wage is $7.25 per hour. The long-run labor demand curve for the firm is
A) 20L-0.05. B) 7.25L-0.05. C) 20L-1. D) 7.25L-1.