Answer the following statements true (T) or false (F)
1. To maximize profits, a competitive firm will maximize the difference between MRP and the wage rate for the laborers it hires.
2. To achieve profit maximization, a firm must produce the profit-maximizing output with the least amount of economic resources.
3. If a firm pays labor $5 and receives a MPL of 10, while paying capital $100 and receiving a MPC of 100, to lower production costs it should hire more labor and less capital.
4. If MPx > MPy, a firm should hire more x and less y.
1. FALSE
2. FALSE
3. TRUE
4. FALSE
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Other things equal, an increase in corporate income taxes will ________ the after-tax profitability of investment projects, which leads to ________ in output and employment
A) increase; an increase B) increase; a decrease C) decrease; an increase D) decrease; a decrease
Refer to the above figure. Suppose the marginal benefit and the marginal cost curves of pollution abatement are normally shaped. Technological change that made it easier to produce in a "cleaner" fashion would cause
A) curve (4 ) to shift out, increasing the optimal amount of pollution abatement. B) curve (3 ) to shift up, raising the marginal benefits and costs and reducing the amount of pollution abatement. C) curve (2 ) to shift out, increasing the optimal amount of pollution abatement. D) curve (1 ) to shift out, increasing the optimal amount of pollution abatement.
The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.
In finance, leverage:
A. multiplies the effect of gains and losses in financial markets. B. is using borrowed money to pay for investments. C. helps explain why a crash is so damaging after a bubble bursts. D. All of these statements are true.