The value of total output must equal the value of total income in an economy for all of the following reasons except
A. For the circular nature of spending and income in the economy.
B. Government expenditures must equal government revenues.
C. One person's expenditures on goods and services is another person's income.
D. Income earned is spent on goods and services, which creates additional production.
Answer: B
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Suppose that in October the price of a cup of cafe latte was $2.50 and 400 lattes were consumed. In November the price of a latte was $2.00 and 300 lattes were consumed. What might have caused this change?
A) The price of tea (a substitute for cafe lattes) rose. B) The price of tea (a substitute for cafe lattes) fell. C) The price of coffee beans (an input of production of cafe lattes) rose. D) The price of coffee beans (an input of production of cafe lattes) fell.
If Safeway reduced its grocery prices below cost in a particular metropolitan area and kept them there until all other grocery stores in the area had been forced into bankruptcy, Walmart would almost certainly sustain huge net losses
A) in the short run and the long run because grocery stores would reappear quickly when Walmart subsequently set high prices. B) in the short run but not in the long run because it could charge very high prices afterward. C) in the short run but not in the long run because the policy would lower Walmart's costs of buying from suppliers. D) only if the government enforced the antitrust laws in a fair and even-handed way.
Refer to Figure 6.4. What area represents the decrease in consumer surplus when the price of computers increases from $1,000 to $1,500?
A. b
B. b + e
C. b + c
D. a + b
In general, risk-loving individuals experience increasing marginal utility from income.
Answer the following statement true (T) or false (F)