Suppose that prices are sticky in the short-run. Which of the following best describes the economy's response to a negative demand shock?
A.
Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will decrease and unemployment will increase.
B.
Firms' inventories will decrease, causing them to increase production. Ultimately, real GDP will increase and unemployment will decrease.
C.
Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will increase and unemployment will increase.
A.
Firms' inventories will increase, causing them to cut production. Ultimately, real GDP will decrease and unemployment will increase.
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The magnitude of the slope of the budget line measures the
A) opportunity cost of the good on the horizontal axis in terms of the good on the vertical axis. B) opportunity cost of the good on the vertical axis in terms of the good on the horizontal axis. C) price elasticity of demand. D) price elasticity of supply.
The cost-minimizing rule is that a firm should utilize inputs such that the marginal physical product of an input divided by the price of the input is the same for all inputs. This is also the profit-maximizing rule because
A) we obtain the profit-maximizing rule by multiplying each ratio by the marginal revenue produced. B) we obtain the profit-maximizing rule by multiplying each ratio by the product price, which is the same for each input. C) the profit-maximizing rule is just the inverse of the cost-minimizing rule. D) they are exactly the same.
Comparative advantage explains why a nation will benefit from trade when:
a. it exports more than it imports. b. its trading partners are experiencing offsetting losses. c. it exports goods for which it is a high-opportunity cost producer, while importing those for which it is a low-opportunity cost producer. d. it exports goods for which it is a low-opportunity cost producer, while importing those for which it is a high-opportunity cost producer.
"The president of the world's biggest polluter (the United States) needs to do more than propose well-intentioned but insufficient measures that amount to using a squirt gun to quell a raging fire." Is this a positive or a normative economic statement? Explain your answer