Greg spends his entire budget on two goods: he plays video games at the mall arcade and he buys pizza. He discovers that his MU/P of video games is lower than his MU/P of pizza. From this, we know that he would be:
A. as happy as possible, since he is already maximizing total utility.
B. happier eating less pizza and playing more video games.
C. happier eating more pizza and playing fewer video games.
D. indifferent to which selection he makes.
Answer: C
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The production possibilities frontier itself illustrates
A) all goods that can be produced by an economy. B) the combination of goods and services that can be produced efficiently. C) all goods and services that are desired but cannot be produced due to scarce resources. D) all possible production of capital goods.
A proponent of supply-side economics would advocate
A. increasing income taxes on saving. B. reducing corporate income tax. C. increasing capital gains tax. D. increasing personal income tax.
The Great Depression provided support for Keynes' view that
a. government action was necessary to ensure interest rates remained at the equilibrium level. b. prolonged periods of unemployment would be present when demand is deficient. c. falling resource prices would bring the economy out of a recession. d. lower interest rates would quickly restore the full employment equilibrium of an economy.
Suppose Raymond and Victoria attend a charity benefit and participate in a silent auction. Each has in mind a maximum amount that he or she will bid for an oil painting by a locally famous artist. This maximum is called
a. deadweight loss. b. willingness to pay. c. consumer surplus. d. producer surplus.