The law of diminishing returns states that, ceteris paribus, the
A. MPP of labor declines as more of it is employed with a given quantity of other (fixed) inputs.
B. MPP of labor declines as product price declines.
C. MPP of labor declines as the wage rate falls.
D. MPP of labor declines as additional land, raw materials, and other factors of production are employed.
Answer: A
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Economists agree that a monopolistically competitive market structure
A) can eliminate any excess capacity if all firms in the industry devote more funds to differentiating their products. B) lowers consumer utility because consumers pay a price higher than the marginal cost of production. C) is detrimental to society because it leads to a waste of scarce resources. D) benefits consumers because firms produce products that appeal to a wide range of consumer tastes.
Suppose a central bank takes actions that will lead to a higher inflation rate. The public, however, is slow to adjust its expectation of inflation. Then, in the short run, unemployment
a. rises. As inflation expectations adjust, the short-run Phillips curve shifts right. b. rises. As inflation expectations adjust, the short-run Phillips curve shifts left. c. falls. As inflation expectations adjust, the short-run Phillips curve shifts right. d. falls. As inflation expectations adjust, the short-run Phillips curve shifts left.
In an economy with a fixed exchange rate, when the market forces try to change the exchange rate, the government:
A. often has to deal with an unhappy domestic population who are constantly dealing with shortages or surpluses of their currency. B. declares it can't change, and holds it constant. C. must buy or sell its currency using its own reserve to bring equilibrium in the market to where it has "fixed" it. D. None of these statements is true.
Which of the following is NOT true about a differentiated-product Bertrand duopoly?
A. Firm 1 and firm 2's prices will be equal to marginal cost. B. Firm 1's price will always be less than marginal cost, while firm 2's price will be above marginal cost. C. Firm 1's price will always be above marginal cost, while firm 2's price will be less than marginal cost. D. None of the answers is correct.