When accounting profits are positive, economic profits
A. must be positive.
B. will be negative.
C. will equal zero.
D. could be positive, negative or zero.
Answer: D
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Mac can bake more cookies than Monica per hour. It must be true that
A) Monica has an absolute advantage in cookie baking. B) Mac has an absolute advantage in baking cookies. C) Mac has a comparative advantage in baking cookies. D) Monica has a comparative advantage in baking cookies. E) Mac cannot benefit by trade between the two of them.
Which of the following will increase the excess reserves of commercial banks?
a. a reduction in the reserve requirement ratio b. an increase in the discount rate c. the sale of government bonds by the Fed to the public d. the sale of government bonds by the Treasury to the public
Even though conspicuous consumption can serve as a credible signal of ability, it can lead to socially inefficient outcomes because:
A. earnings and ability are very poorly correlated. B. conspicuous consumption is not highly correlated with earnings. C. conspicuous consumption can lead to positional arms races. D. conspicuous consumption has been demonstrated to be poorly correlated with ability.
Suppose that the interest rate paid to savers increases. As a result, Tom wishes to save less. This suggests that, for Tom,
A) the substitution effect is greater than the income effect. B) the income effect is greater than the substitution effect. C) utility maximization is not occurring. D) future consumption is a luxury.