The aggregate production function shows us that increasing the number of workers employed will increase output at a constant rate
a. True
b. False
B
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A firm's incentive to compare marginal revenue and marginal cost is an application of the principle that rational people think at the margin
a. True b. False Indicate whether the statement is true or false
The federal budget is balanced and the economy is on the upward-sloping portion of the Laffer curve. Then, tax rates are cut and government purchases are increased. Is a budget deficit inevitable?
A) No, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) increases tax revenues, and if the increase in tax revenues equals the increase in government purchases there is no deficit. B) Yes, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) lowers tax revenues. C) No, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) decreases tax revenues, and if the decrease in tax revenues is less than the increase in government purchases there is no deficit. D) Yes, because a cut in tax rates (on the upward-sloping portion of the Laffer curve) raises interest rates, and higher interest rates discourage investment spending.
For consumers with a binding borrowing constraint, a decrease in the real interest rate ________
A) decreases consumption now, and in the future B) increases consumption now, and in the future C) decreases consumption now, and increases future consumption D) has no impact on consumption
The principal-agent problem of ownership vs. control of the corporation tends to get worse when
A) stock in a corporation is held exclusively by a small number of people who control the company's day-to-day operations. B) stock in the company is tightly held, but there are some "outsider" stockholders. C) stock in the company is very diffusely held, with no individual or group having control over a large block of stock. D) managers have profit-sharing schemes as part of their incentive package. E) managers focus on maximizing the firm's profits, rather than the firm's market share.