When Cody went to the physician with a sore elbow, after hearing Cody's symptoms and examining the elbow manually, Cody's physician had two options: (1) prescribe an anti-inflammatory drug and advise Cody to abstain from vigorous physical activity for a period; or (2) advise Cody to undergo a magnetic resonance imaging (MRI) exam, a costly diagnostic procedure. Which of the following physicians is more likely to recommend option 2?
A. A physician who is concerned about the marginal cost of an MRI.
B. All physicians would recommend option 2.
C. A physician who is compensated under a conventional health insurance plan.
D. A physician who is part of an HMO.
Answer: C
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A downward shift of the planned expenditure curve resulting from an increase in the price level corresponds to
A) a movement up along the aggregate demand curve. B) a movement down along the aggregate demand curve. C) an increase in aggregate demand. D) a decrease in aggregate demand.
The short-run supply curve for a perfectly competitive firm is its
A) marginal cost curve above the horizontal axis. B) marginal cost curve above its shutdown point. C) average cost curve above the horizontal axis. D) average cost curve above its shutdown point.
Holding all other factors constant and using the midpoint method, if a candy manufacturer increases production by 20 percent when the market price of candy increases from $0.50 to $0.60, then supply is
a. inelastic, since the price elasticity of supply is equal to .91. b. inelastic, since the price elasticity of supply is equal to 1.1. c. elastic, since the price elasticity of supply is equal to 0.91. d. elastic, since the price elasticity of supply is equal to 1.1.
The efficient scale of the firm is the quantity of output that
a. maximizes marginal product. b. maximizes profit. c. minimizes average total cost. d. minimizes average variable cost.