Related to the Economics in Practice on page 318: Producers of Honest Tea stop adding sugar to their tea when the marginal utility to consumers of doing so is
A. zero.
B. positive.
C. negative.
D. Indeterminate from the given information.
Answer: B
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When you deposit funds in a bank and then the bank lends these funds to a borrower, the bank is engaged in
A) fiduciary investment. B) fraudulent behavior. C) universal banking. D) financial intermediation.
Policy should create an environment in which the economy can expand its productive capacity rapidly, because that is the ultimate source of higher living standards. This task is the realm of
a. growth policy. b. stabilization policy. c. labor policy. d. inflation policy.
If the production possibilities frontier were a straight line,
A. The Law of Increasing Cost would still apply. B. The opportunity cost of producing one good would decrease as more of another good is produced. C. The opportunity cost of producing one good would increase as more of another good is produced. D. The opportunity cost of producing one good would remain the same as more of another good is produced.
A wheat farmer who must purchase his inputs now but will sell his wheat at a market price at a future date:
A. is a good example of what the chapter refers to as a speculator. B. would hedge by taking the short position in a wheat futures contract. C. would hedge by taking the long position in a wheat futures contract. D. faces a market risk that cannot be offset.