If personal income tax rates are decreased in an attempt to stimulate spending, we should expect to see
A. an increase in consumption and an increase in GDP.
B. an increase in consumption and a decrease in GDP.
C. a decrease in consumption and a decrease in GDP.
D. a decrease in consumption and an increase in GDP.
Answer: A
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Consider a production possibility frontier with jeans on the vertical axis and shoes on the horizontal axis. As the country moves along the frontier closer to the horizontal axis,
A) free lunches occur. B) more shoes are produced. C) more tradeoffs occur. D) more jeans are produced. E) the country eventually chooses an unattainable point.
As a result of OPEC ________ oil prices in 1973 and 1980, real GDP in United States ________
A) increasing; increased B) increasing; decreased C) decreasing; increased D) decreasing; decreased E) increasing; did not change
Arnold Harberger was the first economist to estimate the loss of economic efficiency due to market power. Harberger found that
A) the loss of economic efficiency in the U.S. economy due to market power was small around 1973, about 1 percent of the value of production, but has since grown to about 10 percent. B) because of the increase in the average size of firms since World War II, the loss of economic efficiency has been relatively large, about 10 percent of the value of total production in the United States. C) the loss of economic efficiency in the U.S. economy due to market power was less than 1 percent of the value of production. D) although the number of monopolies was small, the large number of other non-competitive firms in the United States resulted in a large loss of economic efficiency, about 20 percent of the value of total production.
If the marginal physical product (MPP) of the last dollar spent on labor is only half as large as the MPP from the last dollar spent on capital, this firm should
A) increase its use of labor and employ less capital. B) employ more capital. C) increase its use of both labor and capital. D) maintain its current factor utilization pattern.