When marginal costs are increasing:
A. a firm is experiencing diminishing returns.
B. average cost is always increasing.
C. average cost is always decreasing.
D. marginal costs are always greater than average costs.
Answer: A
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If resources are allocated efficiently in a market economy:
A. each person's utility is maximized, and so the result is Pareto optimal. B. the outcome will always be socially desirable. C. the way final goods and services are distributed does not matter to society. D. the outcome may not be socially desirable if distributional issues are also important.
Assume a firm purchases resources a and b under purely competitive conditions and combines these resources to produce X. Product X is sold in a purely competitive market. The MPs of a and b are 6 and 3 respectively and the prices of a and b are $12 and
$6 respectively. If equilibrium exists, the price of X will be: A. $1. B. $.50. C. $2. D. $5.
An economy with an expansionary gap will, in the absence of stabilization policy, eventually experience a(n) ________ in the inflation rate, leading to a(n) ________ in output.
A. decrease; increase B. increase; increase C. decrease; decrease D. increase; decrease
A nation's market-risk premium is related directly to the:
a. Volatility of central bank policies due to unpredictable changes in major macroeconomic variables. b. Volatility of a company's cash flows due to predictable and quantifiable changes in major macroeconomic variables. c. Unpredictable changes in market structure, such as shifts from pure competition to oligopoly or oligopoly to monopoly. d. A company's inability to market products in a recession or period of general disruption. e. Volatility of a company's cash flows due to unpredictable changes in major macroeconomic variables.