"By producing at an output rate at which marginal revenue equals marginal cost, a firm is definitely making positive economic profits." Do you agree or disagree? Why?
What will be an ideal response?
Disagree. When it produces at an output rate at which marginal revenue equals marginal cost, the firm is doing its best (providing price exceeds its average variable cost). However, the firm does not necessarily make a profit. Depending on the market conditions that affect the market price and its average variable cost, it may actually incur a loss but the loss is still the minimum as long as marginal revenue equals marginal cost.
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Farm productivity per acre grew most rapidly after
a. the Revolutionary War b. the Civil War c. World War I d. the 1929 stock market crash e. World War II
Land and capital are substitutes. If rent goes up and the amount of capital used goes up, we can assume that the
A. output effect outweighed the substitution effect. B. the substitution effect outweighed the output effect. C. the substitution effect and the output effect canceled each other out. D. there is no way to determine the relative weights of the substitution effect and the output effect.
Which of the following will most likely have the greatest effect on an individual’s consumption function?
A. Winning a small amount in the lottery B. A one-time tuition grant C. A week of high overtime pay D. An inheritance paying a modest annual dividend
In 2017, some banks in Europe had to make interest payments to borrowers rather than receive interest payments from borrowers. Which of the following statements describes this situation?
A) For these banks, the loans increased required reserves. B) These banks were receiving negative nominal interest rates on these loans. C) For these banks, the loans were liabilities instead of assets. D) All of the above are correct.