If the best lawyer in town is also the best at operating a word processor, then according to economic reasoning, this person should
A) split her time evenly between being a lawyer and a word processor.
B) specialize in being a word processor because it is more capital-intensive.
C) specialize in being a lawyer because its opportunity cost is lower.
D) should pursue the activity she enjoys more.
C
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The key reason that the Laspeyres price index tends to overstate the impact of price changes on consumers is that it:
A) only accounts for price increases and ignore price decreases. B) measures prices two periods after the actual price changes occurred. C) ignores the possibility that consumers alter their consumption as prices change. D) All of the above are correct. E) none of the above
The concavity (bowed-out shape) of the production possibilities curve is the result of: a. the law of demand
b. the law of supply. c. the law of increasing opportunity cost. d. complementarily in consumption.
Which of the following statements most likely describes what occurred in this economy?
a. Stagflation resulted from the decrease in price levels coupled with lower output.
b. An inflationary gap resulted due to the shift from RGDPNR to RGDP2.
c. Output decreased and unemployment increased.
d. An increase in consumer confidence shifted AD1 to AD2.
As disposable income decreases, consumption
A. and saving both increase. B. decreases and saving increases. C. and saving both decrease. D. increases and saving decreases.