People are forced to make choices because of:
A. unlimited wants and unlimited resources.
B. limited wants and unlimited resources.
C. unlimited wants and limited resources.
D. limited wants and limited resources.
Answer: C
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The profit-maximizing combination of resources in a perfectly competitive situation occurs at the point at which
A) MRP of labor = price of labor (wage rate). B) MRP of land = price of land (rental rate per unit). C) MRP of capital = price of capital (cost per unit of service). D) All of the above are correct.
If a perfectly competitive firm produces an output level at which price is less than marginal costs, then the firm should:
A. expand output to earn greater profits or smaller losses. B. reduce output to earn greater profits or smaller losses. C. leave its output level unchanged provided it is covering its variable cost. D. raise its price.
Give an example of cross-price elasticity of demand that involves a substitute and another that involves a complement. Calculate a sample cross-price elasticity of demand for each.
What will be an ideal response?
The market for beef is in long-run equilibrium at a price of $3.25 per pound. The announcement that mad cow disease has been discovered in the United States reduces the demand for beef sharply, and the price falls to $2.00 per pound. If the long-run supply curve is horizontal, then when the long-run equilibrium is reestablished, the price will be:
Select one: A. $3.25 per pound. B. More information is needed to answer this question. C. $2.00 per pound. D. greater than $2.00 per pound but less than $3.25 per pound.