Suppose capital and labor are used in fixed proportions so that each machine requires only one worker. If a decline in the price of capital occurs, then the demand for labor will:
A. decrease solely because of the substitution effect.
B. increase solely because of the substitution effect.
C. increase solely because of the output effect.
D. decrease solely because of the output effect.
Answer: C
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At a given price level, a decrease in consumer credit will shift the aggregate demand curve:
A) rightward. B) leftward. C) both. D) none of the above.
The Fed can influence unemployment in
a. the short run and in the long run. b. the short run, but not in the long run. c. the long run, but not in the short run. d. neither the short nor the long run.
Economic profit equals accounting profit minus:
a. explicit costs. b. implicit costs. c. fixed costs. d. variable costs.
Which of the following suggests that private markets can be effective in dealing with externalities?
a. the "invisible hand" b. the law of diminishing social returns c. the Coase theorem d. technology policy