Which of the following is true at the point where diminishing returns set in?
A. Both marginal product and marginal cost are at a maximum.
B. Both marginal product and marginal cost are at a minimum.
C. Marginal product is at a maximum and marginal cost at a minimum.
D. Marginal product is at a minimum and marginal cost at a maximum.
Answer: C
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When there is a recessionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; decline B. increase; raise; decline C. decline; lower; expand D. decline; raise; decline
The quantity theory of money assumes that the velocity of money:
a. is constant. b. will rise if the money supply rises and fall if the money supply falls. c. will rise if the money supply rises, but it will not change if the money supply falls. d. will fall if the money supply rises, and it will rise if the money supply falls. e. will fall if the money supply rises, but it will not change if the money supply falls.
A decision to supply labor or not to supply it is also a decision to
A. earn the highest possible wage. B. demand or forgo a certain amount of leisure. C. be as productive as possible. D. join the union.
Classical economists believe that in the short run, in the real world:
A. prices are flexible but wages were not flexible. B. prices and wages are flexible. C. wages are flexible but prices were not flexible. D. prices and wages aren't flexible enough to bring about equilibrium.