People often complain about paying "outrageously high prices." Define an "outrageously high price" in terms of consumer surplus.
What will be an ideal response?
Most of the time when you go to the store you pay much less for an item than you would be willing to pay. This means that you earn considerable consumer surplus. An "outrageously high price" is a price so close to the maximum that you are willing to pay for an item that you get no or almost no consumer surplus.
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If a farmer’s opportunity cost of producing 10,000 bushels of wheat is 5,000 fewer bushels of soybeans, then his or her opportunity cost of producing 5,000 bushels of soybeans must be 10,000 fewer bushels of wheat.
Answer the following statement true (T) or false (F)
In the short run in the Keynesian model, a sharp decline in oil prices would leave the economy with a ________ level of output and a ________ real interest rate
A) higher; lower B) lower; higher C) lower; lower D) higher; higher
With positive externalities, market equilibrium occurs at a quantity that is greater than the socially optimal output
a. True b. False Indicate whether the statement is true or false
According to the permanent income hypothesis, households will tend to react to a temporary tax cut by
A. assuming the new tax level will be permanent. B. saving most of the additional disposable income. C. increasing consumption sharply in response to the higher disposable income. D. temporarily increasing their marginal propensity to consume.