After several years of slow economic growth, world demand for petroleum began to rise rapidly in the 1990s. Much of the increase in demand was met by additional supplies from sources outside OPEC. OPEC during this time was unable to restrain output among members in its effort to lift oil prices. What best describes these events?
A. The rise in demand reflects a movement down along the demand curve as supply shifted to the right when suppliers produced more oil.
B. The rise in demand shifted the demand for oil to the right. As price rose, supply of oil also rose.
C. The rise in demand shifted the demand for oil to the right. OPEC actions shifted the demand for oil back to the left.
D. The rise in demand shifted the demand for oil to the right. As price rose, quantity of oil supplied rose.
Answer: D
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An increase in disposable income
A. decreases consumption because it shifts the consumption schedule downward. B. increases consumption because it shifts the consumption schedule upward. C. increases consumption by moving upward along a given consumption schedule. D. decreases consumption by moving downward along a given consumption schedule.
The Bubby Gum factory produces bubble gum. Joanne is one of the employees, and she produces 10 packs of bubble gum per hour. Joanne's money wage rate is $12 per hour. If a packet of bubble gum sells for $1.00, then
A) Joanne is creating a $2.00 per hour profit for the firm. B) Joanne is creating a $2.00 per hour loss for the firm. C) the Bubby Gum company should pay Joanne more. D) the Bubby Gum company should decrease the price of the bubble gum so it sells more and makes a larger profit. E) None of the above answers is correct because more information about Joanne's real wage is needed to decide what to do.
Let the production function be q = ALaKb. The function exhibits constant returns to scale if
A) a + b = 1. B) a + b > 1. C) a + b < 1. D) Cannot be determined with the information given.
If Logan received a $2,500 bonus and his MPS is 0.20, his consumption rises by $________ and his saving rises by $________.
A. 2,500; 20 B. 500; 100 C. 2,000; 500 D. 2,500; 200