Suppose that the price of labor (PL) is $10 and the price of capital (PK) is $20. What is the equation of the isocost line corresponding to a total cost of $100?
A) PL + 20PK
B) 100 = 10L + 20K
C) 100 = 30(L+K)
D) 100 + 30 (PL + PK)
E) none of the above
B
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In an open economy, a decrease in the government's budget deficit will ________ the domestic real interest rate and ________ the level of capital investment in the country, holding other factors constant.
A. increase; increase B. decrease; increase C. increase; decrease D. decrease; decrease
Which of the following best reflects the nonactivist view of stabilization policy?
a. Monetary and fiscal policies exert little impact on the economy. b. Discretionary policy changes often make matters worse. c. Fiscal policy should be used to help stabilize the economy; monetary policy should not. d. Expansionary monetary policy is the primary source of rapid economic growth.
Simple majority voting sometimes leads to projects being undertaken whose costs are greater than the benefits. How is this possible?
A) It is not possible, unless the voting results are rigged. B) Because voters have no way to express the intensity of their preferences. C) Because many voters choose to be rationally ignorant. D) Because free riding is pervasive.
When stock prices reflect fundamental values:
A. all investors will have positive returns. B. all companies will have an easier task of obtaining financing for investment projects. C. the allocation of resources will be more efficient. D. the overall level of the stock market should move higher.