One reason the housing bubble occurred is because the:
A. herd instinct caused everyone to stop buying homes.
B. securitization of mortgages meant more mortgages were low-risk, attracting investors.
C. recency effect affected people's perceptions of home values.
D. All of these statements are true.
Answer: C
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Diminishing marginal product of labor occurs when: a. adding another unit of labor increases output, but not by as large a margin as the previous unit of labor employed. b. the average product of labor begins to rise
c. adding another unit of labor increases output by a larger margin than the last unit of labor employed. d. all inputs are varied simultaneously in the same proportion.
If the MPC were to increase from 0.75 to 0.8, then the spending multiplier would:
A. increase from 4 to 5. B. decrease from 5 to 4. C. increase from 0.2 to 0.25. D. decrease from 1.25 to 1.2.
If Freedonia changes its laws to allow international trade in software and the world price is higher than its domestic price, then it must be the case that
a. both consumer surplus and producer surplus increase. b. consumer surplus increases and producer surplus decreases. c. consumer surplus decreases and producer surplus increases. d. both consumer surplus and producer surplus decrease.
A firm that shuts down in the short run experiences losses equal to its
A. total variable costs. B. total variable costs minus its total fixed costs. C. average variable costs. D. total fixed costs.