The substitution bias is believed to cause the consumer price index to:
a. overstate the true rate of inflation.
b. understate the true rate of inflation.
c. understate the true GDP deflator.
d. none of these.
a
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A firm sells a product in a perfectly competitive market. The marginal cost of the product at the current output level of 500 units is $1.50. The minimum possible average variable cost is $1. The market price of the product is $1.25. To maximize profits, the firm should
A. decrease production to less than 500 units. B. increase production to more than 500 units. C. continue producing 500 units. D. shut down.
The personal distribution of income measures which of the following?
A) the distribution of earnings by the factors of production B) proportion of income generated by the four types of expenditures on goods and services C) the distribution of income among households D) the distribution of income among nations E) how federal tax revenues are related to the type of businesses that employs the taxpayers
If the government were to increase taxes, it would be enacting:
A. contractionary fiscal policy. B. expansionary fiscal policy. C. contractionary monetary policy D. expansionary budgetary policy.
A straight-line production possibilities curve
a. reflects increasing production costs b. occurs when opportunity costs are constant c. is impossible d. exists only when one good is produced e. is positively sloped