The basic idea of maximization can be stated as follows:
What will be an ideal response?
Do it if the benefit is greater than the cost of doing it.
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If interest rates in Europe fall below interest rates in the United States, then, other things equal, the demand for euros will decrease
a. True b. False Indicate whether the statement is true or false
Moral hazard is:
A. when buyers and sellers with the same information about the quality of a good or the riskiness of a situation agree to a somewhat shady deal. B. the tendency for people to behave in a riskier way or provide less effort when they do not face the full consequences of their actions. C. when people engage in behavior that is considered highly desirable by the person who bears the cost of the behavior. D. when buyers and sellers have different information about the quality of a good or the riskiness of a situation.
Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
Regulation that keeps the rate of return in the industry competitive is known as
A) rate-of-return regulation. B) cost-of-service regulation. C) social regulation. D) deregulation.