Economies of scale are
A) charges to savers and borrowers imposed by banks in exchange for reducing transactions costs.
B) the reduction in costs per unit that accompanies an increase in volume.
C) decreases in transactions costs that occur as information costs increase.
D) decreases in information costs that occur as transactions costs increase.
B
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Suppose two goods coffee and creamer provide the consumer with utility but only if they are consumed in fixed proportions. An increase in the price of coffee will yield
a. a substitution effect and an income effect in opposite directions. b. a substitution effect and an income effect in the same direction. c. a substitution effect but no income effect. d. an income effect but no substitution effect.
Some argue that "financing an investment with your own personal funds is always less expensive than borrowing the funds from a bank because it's an interest-free loan.". To an economist, this argument
a. is true because borrowed funds involve an explicit cost, while use of one's own funds involves only an implicit cost b. ignores the opportunity cost associated with using one's own funds c. is false because the bank can always match the interest rate offered on the loanable funds market d. is true only if the investment generates less revenue than the revenue generated by the interest-bearing deposit in the bank e. ignores the cost of sacrificing present consumption
Correcting a market with an externality through taxation is ________ correcting it through a quota.
A. less efficient than B. more efficient than C. just as efficient as D. Any of these statements could be true depending on whether the tax is imposed on the buyer or seller.
Assuming an upward-sloping AS curve, if an economy is at full employment and investment spending decreases while all other levels of spending remaining constant, then
A. A GDP gap emerges. B. Output increases. C. The price level increases. D. The unemployment rate falls.