If consumers completely cease purchasing a product when its price increases by any amount, then demand is:
A. unit elastic.
B. perfectly inelastic.
C. inelastic.
D. perfectly elastic.
Answer: D
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When a perfectly competitive, well-functioning market is in equilibrium:
A. consumer surplus is minimized. B. producer surplus is minimized. C. total surplus is maximized. D. total surplus is zero.
The relevant market for a firm consists only of firms operating within the same industry
Indicate whether the statement is true or false
Doug wants to start up his own business, and needs $25,000 to get it off the ground. He can either withdraw it from his savings account, where he currently earns 3 percent, or he can take out a loan for $25,000 and pay 5 percent interest. Doug should compare:
A. the explicit cost of $750 to the implicit cost of $1,250 and choose to use his savings. B. the explicit cost of $25,750 to the explicit cost of $26,250 and choose to borrow the money. C. the implicit cost of $750 to the explicit cost of $1,250 and choose to borrow the money. D. the implicit cost of $750 to the explicit cost of $1,250 and choose to use his savings.
According to Keynesian theory, the correct fiscal policy action to stimulate the economy would be to:
A. Raise taxes to increase aggregate demand. B. Increase the money supply to increase aggregate supply. C. Increase government expenditures to increase aggregate demand. D. Increase education spending to increase aggregate supply.