Suppose a consumer buy books and DVDs. The price of a book is $10, the price of a DVD is $20 and the consumer's income is $400. If books are measured on the vertical axis and DVDs are measured on the horizontal axis, then the slope of the budget line is
A. 2.
B. -2.
C. 1/2.
D. -1/2.
B. -2.
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A teenager plays his radio loudly at the beach. What can we conclude?
A) He creates a negative externality if it unintentionally annoys or upsets others. B) He creates a positive externality if it unintentionally benefits others who enjoy the same music. C) He creates no externality, if others remain unaffected by the music. D) All of the above.
A textbook publisher is in monopolistic competition. If the firm spends nothing on advertising, it can sell no books at $100 a book, but for each $10 cut in price, the quantity of books it can sell increases by 20 books a day
The firm's total fixed cost is $2,400 a day. Its average variable cost and marginal cost is a constant $20 per book. If the firm spends $1,200 a day on advertising, it can increase the quantity of books sold at each price by 50 percent. Compared to the situation if it does not advertise, if the firm advertises, its economic profit A) increases by $400. B) decreases by $400. C) doubles. D) is the same as with no advertising.
Assume there is an improvement in technology that increases the marginal product of each unit of labor. This would have the effect of:
A) reducing the average total cost, average variable cost, and marginal cost of production. B) increasing the average total cost, average variable cost, and marginal cost of production. C) reducing the average variable cost and marginal cost of production, but average total cost would be unchanged. D) reducing the average total cost and average variable cost of production, but marginal cost would be unchanged.
When real Gross Domestic Product (GDP) rises, which of the following will automatically occur?
A. an increase in unemployment compensation expenditures B. an increase in income tax revenues C. a dcrease in government expenditures D. an increase in income tax rates