Refer to the graph above. When output increases from Q 1 and the price level decreases from P 1, this change will:
a. Be caused by a shift in the aggregate supply curve from AS1 to AS2
b. Result in a movement along the aggregate demand curve from e3 to e1
c. Result in a movement along the aggregate demand curve from e1 to e2
d. Be caused by a shift in the aggregate supply curve from AS1 to AS3
Answer: d. Be caused by a shift in the aggregate supply curve from AS1 to AS3
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The local mall has a make-your-own sundae shop. They charge customers 35 cents for each fresh fruit topping and 25 cents for each processed topping. Barbara is going to make herself a sundae
The total utility that she receives from each quantity of topping is given by the following table: Fresh Fruit Topping Processed Topping # of Units Total Utility # of Units Total Utility 1 10 1 10 2 18 2 20 3 24 3 10 4 28 4 0 5 30 5 -10 6 28 6 -20 7 24 7 -30 8 18 8 -40 9 10 9 -50 10 -6 10 -60 a. What is the marginal utility of the 6th fresh fruit topping? b. Of the two toppings, which would Barbara purchase first? Explain. c. If Barbara has $1.55 to spend on her sundae, how many fresh fruit toppings and processed toppings will she purchase to maximize utility? d. If money is no object, how many fresh fruit toppings and processed toppings will Barbara purchase to maximize utility? e. Which of the basic assumptions of preferences are violated by preferences shown in the table above?
Wheat farmers in Kansas would benefit from a devastating crop failure in North Dakota (another major wheat-producing state) if the U.S. demand for wheat is
a. inelastic b. elastic c. unit elastic d. downward sloping e. perfectly elastic
When diminishing returns are present,
a. total output increases at an increasing rate b. total output begins to decrease c. the marginal physical product curve begins to rise d. total output increases at a decreasing rate e. it's an indication that the firm is using too much labor
Requiring banks to use less leveraging is equivalent to:
A. Expanding the loan portfolio of banks B. Reducing the banks' reserve ratio C. Requiring a higher level of bank net worth D. Requiring banks to accept more deposits