The principle of diminishing marginal utility can potentially be used to support policies that redistribute income. This principle suggests that increases in income for an individual will generate less additional happiness the higher the level of income
a. True
b. False
Indicate whether the statement is true or false
True
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Assume glassware is produced by firms in a competitive industry, one of which is Gregor's Glassworks.
(i) Suppose a rent increase is imposed on Gregor's Glassworks but not on its competitors. When would the rent increase cause Gregor to exit the industry? Explain. (ii) Suppose an earthquake destroys most of Gregor's stock but does not affect his competitors. When would the damages cause Gregor to exit the industry? Explain.
As default risk increases, the expected return on corporate bonds ________, and the return becomes ________ uncertain, everything else held constant
A) increases; less B) increases; more C) decreases; less D) decreases; more
An increase in human capital
a. is of secondary importance to economic growth compared to physical capital. b. causes the production function to shift downward and become flatter. c. causes the production function to shift upward. d. causes the production function to shift downward. e. can be separated from labor.
Which statement is correct?
a. The discount rate is the rate banks charge one another on overnight loans b. The Federal funds rate is the rate banks charge their most creditworthy customers c. The real interest rate is greater than the nominal interest rate during periods of inflation d. The prime interest rate rises and falls with the Federal funds rate