Assume Cathy's Cupcake Company operates in a perfectly competitive market producing 10,000 cupcakes per day. At this output level, price exceeds the firm's marginal and average variable costs. It follows that producing one more cupcake will cause this firm's
A. profits to remain unchanged.
B. total cost to decrease.
C. profits to increase.
D. profits to decrease.
Answer: C
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At any quantity at which the demand curve lies above the supply curve,
a. economic efficiency is achieved b. the cost of producing the last unit exceeds its value to some consumer c. marginal cost exceeds the market price d. the market is Pareto efficient e. the value of the last unit to some consumer exceeds the cost of producing it
Which of the following is most important for long-run growth and a healthy economy?
a. a low rate of household savings and a high rate of consumption b. a high rate of both savings and consumption c. a high rate of government expenditures financed by borrowing d. high tax rates and budget surpluses
If the Federal Reserve decided to include virtual money like Bitcoins in its measure of the money supply, what would be the effect on M1 or M2?
A) M1 would rise. B) M1 would fall. C) M1 would rise and M2 would remain constant. D) M2 would rise but M1 would remain constant.
Joe's increase in wages has been identical to the increase in the price level. Joe thinks that he is better off and has increased his expenditures. Joe's behavior is consistent with
A) the classical model. B) Say's law. C) money illusion. D) a vertical aggregate supply curve.