Which of the following is false about potential output?
A. It is the level of output an economy can achieve when labor is employed at its natural level.
B. It is the long run output level that guarantees price stability.
C. If a country is producing its potential output, then it is producing at a point on its production possibilities frontier.
D. It is also called the natural level of real GDP.
Ans: B. It is the long run output level that guarantees price stability.
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The change from prescriptive rights to priority rights meant all of the following except
(a) Entrepreneurial costs of economic development, such as river and lake pollution, had to be paid by those who were responsible for the costs. (b) The courts encouraged entrepreneurial activity by judicial interpretation. (c) Amenity rights to scenery, clear air and quiet enjoyment could be reduced. (d) Judges placed social weights upon property rights that favored some more than others.
Which of the following costs of inflation can be significant even if actual inflation and expected inflation are the same?
a. menu costs b. inflation tax c. shoeleather costs d. All of the above are correct.
Why might a rise in the price of electric razors result in an increase in demand for nonelectric razors?
(A) Because nonelectric razors are more plentiful than electric razors. (B) Because people might decide to shift to nonelectric razors to save money. (C) Because electric razors are normal goods but nonelectric razors are inferior goods. (D) Because nonelectric razors work better than electric razors.
If the marginal cost of producing a product, including the externality, is higher than the marginal cost when the externality is ignored, then which of the following must be true?
A. The production of the product generates a negative externality. B. The production of the product generates a positive externality. C. The price of the product is too high compared to what would be socially ideal. D. The production of the product is too small compared to the ideal amount.