The marginal rate of substitution is equal to the
A) slope of the demand curve.
B) marginal cost of each good.
C) magnitude of the slope of the indifference curve.
D) relative prices of the two goods.
C
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Suppose the economy is initially in short-run equilibrium and the Fed decreases the nominal money supply. If the price level remains constant, real GDP will ________ relative to potential GDP and the real interest rate will ________
A) increase; increase B) increase; decrease C) decrease; increase D) decrease; decrease
A tariff is which type of tax?
(a) Progressive (b) Regressive (c) Proportional (d) Neutral
In the presence of a negative externality, a specific tax can achieve the social optimum because
A) output is reduced to zero as a result. B) it internalizes the external cost. C) it directly charges the producer for polluting. D) the price of the good rises by the full amount of the tax.
The economic problem of scarcity
a. is unique to a capitalist economy. b. requires that choices be made among alternatives. c. disappears as technology advances. d. affects only less-developed countries.