Jake is a corn farmer in Nebraska. He rents his land on a long-term lease for $250,000 a year. He pays his farm hands $28,000 a year
Is his rent a fixed cost or a variable cost? Are the wages he pays his workers a fixed cost or a variable cost? Briefly explain your answers.
Jake's rent is a fixed cost. He is renting his land on a long-term lease and so the land is a fixed factor. The wages Jake pays are a variable cost. Labor is a variable factor so the wages are a variable cost.
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Moving from left to right, a U-shaped curve starts with a
A) negative slope, reaches a minimum, then ends with a positive slope. B) negative slope, reaches a minimum, then ends with a negative slope. C) positive slope, reaches a maximum, then ends with a negative slope. D) negative slope, reaches a maximum, then ends with a positive slope. E) positive slope, reaches a minimum, then ends with a negative slope.
For a single-price monopolist, marginal revenue is less than price because
A) the revenue gain from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price. B) the revenue gain from the last unit sold is offset by further gains in price on units not sold at all. C) total revenue always decreases as output increases. D) the price does not have to be lowered on all previous units sold.
In the Keynesian model, suppose the Fed sets a target for the money supply. If the IS curve shifts to the left, and the Fed wants to keep output unchanged, what should the Fed do?
A) Reduce taxes. B) Reduce the money supply. C) Increase taxes. D) Increase the money supply.
The theory that government borrowing may function like an increase in taxes, that is, reducing current consumption and business expenditures, is known as
A) the marginal propensity to consume. B) the Ricardian equivalence theorem. C) planned tax policy. D) Congressional Tax policy.