The process of entry and exit into a monopolistically competitive market continues until:
A. profits are positive.
B. profits are zero.
C. profits are negative.
D. Any of these statements could be true.
Answer: B
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The Toys-R-Danger-Us Toy Company can produce 500 water pistols for a total cost of $1,400 . If the variable cost of producing 500 water pistols is $1,300, then
a. fixed cost must be $100 b. marginal cost must be $1,300 c. marginal cost must be increasing d. average variable cost must be decreasing e. average fixed cost must be constant
If a country with a large government debt uses money creation to service and repay the debt, this will lead to
a. lower interest rates. b. an appreciation of the nation's currency in the foreign exchange market. c. inflation, higher interest rates, and a financial crisis. d. rapid economic growth, as the expansionary monetary policy stimulates the economy and generates the additional tax revenue to service the larger debt.
A recession has no benefit to society-it represents a sheer waste of resources
a. True b. False Indicate whether the statement is true or false
The nominal interest rate on taxable bonds is 8%, while on municipal bonds (which aren't taxable) it is 5%. The expected inflation rate is 3% and the tax rate on interest income is 40%. Calculate the expected real after-tax interest rate on both bonds. Which would be the better investment? Now suppose the actual inflation rate turned out to be 6%. Which bond was the better investment? Would your answer change if inflation had turned out to be 0%?
What will be an ideal response?