Table 1.2 shows the hypothetical trade-off between different combinations of Stealth bombers and B-1 bombers that might be produced in a year with the limited U.S. capacity, ceteris paribus.Table 1.2Production Possibilities for BombersCombinationNumber of B-1 BombersOpportunity cost(Foregone Stealth)Number of Stealth BombersOpportunity cost (Foregone B-1)A20Na195 B35 180 C45 150 D50 100NAOn the basis of Table 1.2, the law of increasing opportunity costs applies to
A. Stealth bombers but not to B-1 bombers.
B. B-1 bombers.
C. Both B-1 bombers and Stealth bombers.
D. Neither bomber.
Answer: C
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If the demand curve falls below the ATC curve but lies above AVC, then the firm should
A. operate in the short run and the long run. B. should shut down. C. operate in the short run but not the long run. D. set price = marginal cost.
An industrial union would be organized among a group such as
A. air traffic controllers. B. plumbers. C. airline pilots. D. steel workers.
The following is an example of the moral-hazard problem: Homebuyers do not properly evaluate the risks involved in buying a home, because they are assuming the government will bail them out of a bad mortgage as it has done before.
Answer the following statement true (T) or false (F)
Answer the following questions true (T) or false (F)
1. In absolute value, the tax multiplier is greater than the government purchases multiplier. 2. If government increases taxes by the same amount it increases government spending, there will be no effect on aggregate demand: the increase in government spending is offset by an equal decrease in consumption spending by households. 3. The tax multiplier is calculated as "one minus the government purchases multiplier."