The economy pictured in the figure has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; A
B. recessionary; C
C. recessionary; B
D. expansionary; A
Answer: D
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The Average Product of Labor is
A) the change in total product resulting from an extra unit of labor, holding other factors constant. B) the ratio of output to the number of workers used to produce that output. C) the amount of output that can be produced by a given amount of labor. D) equal to the marginal product of labor when the average product is increasing.
Use the aggregate expenditures model and assume the marginal propensity to consume (MPC) is 0.80 . An increase in government spending of $1 billion would result in an increase in GDP of:
a. $0. b. $0.8 billion. c. $1.0 billion. d. $5.0 billion. e. $8.0 billion.
A firm is more likely to have a natural monopoly when:
A. the size of the market is small relative to the efficient scale of the firm. B. the size of the market is large relative to the efficient scale of the firm. C. the firms face no or low fixed costs. D. the government grants the firm an exclusive license to operate.
Consider a housing development built near an existing airport. After the houses are occupied, homeowners complain that the airport imposes a negative externality on them and it should be moved or otherwise limited
Is the airport a negative externality? A) No, the airport was there first. B) No, if the original property values reflect the costs imposed by the airport. C) No, airports are government entities and therefore don't impose costs on individuals. D) Yes, the airport's noise should be curtailed for the well-being of the homeowners.