The line segment ST describes the region where
A. increases in output do not cause higher prices because of a large portion of unemployed resources.
B. prices and output increase together.
C. increases in prices do not generate any increase in output.
D. increases in prices cause decreases in output.
C. increases in prices do not generate any increase in output.
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Use the following graphs for a perfectly competitive market in the short run to answer the next question.
Which of the following statements is true?
A. The firm is earning a normal profit. B. The firm should increase production in the short run. C. The firm is making economic profits. D. The firm is generating a loss.
A sale of U.S. government securities by the Fed causes a(n)
A) expansion of the money supply equal to the amount of the securities sold. B) contraction of the money supply equal to the amount of the securities sold. C) expansion of the money supply of more than the amount of the securities sold. D) contraction of the money supply of more than the amount of the securities sold.
The substitution bias in the CPI arises because the CPI:
A. is based on a fixed basket of goods and services. B. does not adequately allow for improvements in products. C. understates the "true" rate of inflation. D. measures prices at two different times.
Marissa owns a small cottage by the lake. Big Boy’s Sawmill is next door, and it dumps sawdust into a sinkhole it owns. Unfortunately for Marissa, the sinkhole opens into a brook on her land, which gets clogged by the sawdust. It costs Marissa $3,000 per year to clean up the sawdust. Big Boy’s can dispose of the sawdust by having it hauled away for $2,000 per year. Marissa offers to pay Big Boy’s $2,500 per year to have the sawdust hauled away. In this example of the Coase theorem, what is the negative externality?
a. the cabin b. the sawdust c. the lake d. the sinkhole