Which price in Figure 4-21 is equilibrium?
A. P1
B. P2
C. P3
D. There is no equilibrium price in the diagram.
Answer: B
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What is meant by consumer sovereignty?
What will be an ideal response?
The perfectly competitive firm maximizes profits when
A) it produces and sells the quantity at which the difference between marginal revenue and marginal cost is the greatest. B) it produces and sells the quantity at which marginal revenue and marginal cost are equal. C) it produces and sells the quantity at which the difference between average revenue and average cost is the greatest. D) it produces and sells the quantity at which the difference between price and average cost is the greatest.
One reason most central bankers do not set an inflation target of zero is:
A. they believe it would cause price volatility. B. it is almost impossible to achieve. C. the central bank could hit the lower bound. D. none of the answers given is correct.
Keynesians:
A. generally favor laissez-faire policies. B. believe that frictional unemployment does not exist. C. believe that all unemployment is cyclical unemployment. D. generally favor activist government policies.