Opportunity cost is best defined as:
A. the value of the best forgone alternative.
B. marginal cost minus marginal benefit.
C. the time spent on an economic activity.
D. the money cost of an economic decision.
Answer: A
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Government spending and taxes
A) do not change aggregate demand. B) are an important component of aggregate supply. C) do not play a big role in determining GDP. D) are a major determinant of aggregate demand. E) cannot affect the price level.
The industrial organization economics perspective assumes that the industry _____________ is the most important determinant of long-run profitability
a. Structure b. Conduct c. Performance d. None of the above
A price index like the CPI, which uses a fixed basket of goods from one year to the next, will tend to overstate inflation because
a. producers are likely to change the number of goods they sell from year to year. b. producers will generally reduce the quality of goods as prices increase over time. c. consumers will tend to substitute away from goods that become more expensive. d. consumers will usually reduce their consumption of goods when they become relatively cheaper.
For a monopolist to maximize profits, its
A. price equals marginal revenue. B. marginal revenue exceeds price. C. price equals average total cost. D. price exceeds marginal cost.