Rationality is a normative concept
Indicate whether the statement is true or false
F
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If real GDP equals aggregate planned expenditure, then inventories
A) fall below their target levels. B) rise above their target levels. C) equal their target levels. D) are either above or below their target levels depending on whether planned inventories are above or below their target levels. E) None of the above answers is necessarily correct because there is no relationship between inventories and aggregate planned expenditure.
When producing a good creates pollution, an external cost, and the government imposes a tax equal to the marginal external cost, then
A) the amount of output moves farther away from the efficient amount. B) transaction costs will be high. C) the efficient amount of the good will be produced. D) property rights must have already been established.
When a monopolist chooses the level of output where marginal cost equals marginal revenue:
A. profits are maximized. B. price is set at marginal revenue. C. price is equal to average total costs. D. total revenue is maximized.
The optimal time for the implementation of restrictive fiscal policy would be
a. before inflation accelerated. b. after inflation accelerated. c. during a recession. d. after the price level had risen significantly.