Suppose the demand for lawnmowers goes down when the price of gasoline goes up. We can say that these two goods are
A. substitutes.
B. unrelated goods.
C. perfect substitutes.
D. complements.
Answer: D
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
All solutions to market failures in markets for public goods or common resources:
A. try to force the internalization of externalities. B. are not perfect, and total surplus cannot be maximized in these markets. C. need to be accepted by the affected parties to be effective. D. must be provided by the government.
The reserve ratio is
A. the ratio of loans to available reserves. B. the ratio of available reserves to loans made. C. the percentage of every dollar deposited in a checking account that a bank may loan out. D. the percentage of every dollar deposited in a checking account that a bank must maintain in reserves.
The MR = MC rule can be restated for a purely competitive seller as P = MC because:
A. each additional unit of output adds exactly its price to total revenue. B. the firm's average revenue curve is downsloping. C. the market demand curve is downsloping. D. the firm's marginal revenue and total revenue curves will coincide.