Imagine Tom's annual salary as an assistant store manager is $30,000, he owns a building that rents for $10,000 yearly, and his financial assets generate $1,000 per year in interest. One day, after deciding to be his own boss, he quits his job, evicts his tenants, and uses his financial assets to establish a bicycle repair shop. To run the business, he outlays $15,000 in cash to cover all the costs involved with running the business, and earns revenues of $50,000. Tom should:
A. close his shop and go back to what he was doing before with his time and assets, because it was earning him $6,000 more than he's earning now.
B. keep his shop going because he's earning a healthy $35,000 a year.
C. keep his shop going because he's earning $5,000 more than his salary before.
D. None of these is true.
A. close his shop and go back to what he was doing before with his time and assets, because it was earning him $6,000 more than he's earning now.
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New Keynesians and new classical economists both believe that
a. people form their expectations rationally. b. aggregate demand movements primarily drive business cycles. c. individual agents engage in optimizing behavior. d. The key source of disagreement centered around how people form their expectations. e. all but d are correct.
Which of the following would not cause market demand for a normal good to decline?
a. An increase in the price of a substitute. b. An increase in the price of a complement. c. A decline in consumer income. d. Consumer expectations that the good will go on sale in the near future. e. An announcement by the Surgeon General that the product contributes to premature death.
The main duty of the Environmental Protection Agency is to monitor a government-enforced system of property rights
a. True b. False Indicate whether the statement is true or false
Economists view the “tragedy of the commons” as a problem of:
a. free riding. b. selfishness. c. exclusion. d. property rights.