When the Federal Reserve sells government bonds to the public, it:
A. increases the M1 money supply and increases the reserves of the commercial banking system.
B. increases the M1 money supply, while reducing the reserves of the commercial banking system.
C. reduces the M1 money supply, while increasing the reserves of the commercial banking system.
D. reduces the M1 money supply and decreases the reserves of the commercial banking system.
Answer: D
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In a competitive economy, the market system can still fail to produce the efficient level of output due to side effects called ______.
a. externalities b. subsidies c. signals d. warranties
For a perfectly competitive market in which firms face an identical constant marginal costs, the amount of consumer surplus increases if
A) market demand decreases. B) market demand increases. C) marginal cost increases. D) none of the above: insufficient information to answer.
In the short run, a monopolistically competitive firm
A. never earns positive economic profits. B. always earns positive accounting profits. C. can earn positive, negative, or zero economic profits. D. always earns positive economic profits.
Refer to Scenario 9.2 below to answer the question(s) that follow. SCENARIO 9.2: Tom borrowed $40,000 from his parents to open a donut stand. He agrees to pay his parents a 5% yearly return on the money they lent him. His other yearly fixed costs equal $10,000. His variable costs equal $25,000. He sold 40,000 dozen donuts during the year at a price of $2.00 per dozen.Refer to Scenario 9.2. Tom's total costs equal
A. $37,000. B. $40,000. C. $50,000. D. $59,000.