Answer the following statements true (T) or false (F)
1. Economic theory and economic policy are synonymous.
2. Your decision to attend college was a microeconomics choice.
3. Goods directly used by individuals and households are known as capital goods.
4. The relationship between the price of a book and the number of volumes purchased would be an example of microeconomics.
1. FALSE
2. TRUE
3. FALSE
4. TRUE
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The tables above show the marginal costs and benefits from production of paper. If the market is perfectly competitive and unregulated, at the equilibrium level of output, the marginal external cost is
A) zero B) $10 C) $20 D) $30
The idea that people will not consciously make decisions that make them worse off is known as
A) rationality assumption. B) the decision duality. C) Adam Smith's doctrine. D) incentive assumption.
When the social costs exceed the private costs, economists state that there is
A) a positive externality. B) an underproduction of output. C) a negative externality. D) social appreciation of resources.
Which of the following statements is true?
a. When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price. b. When a monopolistic firm decides to increase price, its profit will increase. c. When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. d. Average revenue is the same as price for both competitive and monopoly firms.