The multiplier effect occurs when:
A. the level of consumer confidence increases more than predicted given a tax cut.
B. increased spending by one or more individuals causes others to react and increase their savings.
C. spending by one person generates income for others and causes others to spend more too, increasing the impact of the initial spending on the economy.
D. None of these is true.
Answer: C
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Why is the production possibilities frontier bowed out?
What will be an ideal response?
If a firm has two plants, one located in desirable Scenic Springs and the other located in the undesirable Swamp Lands, the workers in Scenic Springs will be paid ________ than the workers in Swamp Land and the difference in wages is referred to as a ________.
A) less; compensating wage differential B) less; worker equity payment C) more; worker equity payment D) more; compensating wage differential
In general, perfectly competitive firms maximize their profit by producing the level of output at which:
A. total cost is minimized. B. average cost equals price. C. marginal cost equals price. D. average cost is minimized.
Which one of the following is not a method used to set transfer prices?
A. Marginal production cost method B. Opportunity cost method C. Negotiated pricing method D. Market price method