Consider the perfectly competitive firm in the figure above. At the profit maximizing level of output, the firm will
A) make an economic profit equal to the area ABCD.
B) incur an economic loss equal to the area ABCD.
C) make zero economic profit.
D) make an economic profit equal to the area AECD.
A
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As the real interest rate ________, the real investment spending ________
A) decreases; decreases B) increases; decreases C) increases; increases D) changes; does not change
On the Laffer curve, an increase in tax rates causes tax revenue to increase if the starting point is
A. to the right of the top. B. exactly at the top. C. to the left of the top. D. to the farthest point to the right.
Suppose people value clean air more as their incomes increase. What would happen to the optimal amount of clean air as a country develops economically? Is there an economic prediction we can make from this?
What will be an ideal response?
If two investments are perfectly positively correlated:
A. there is no benefit from diversification. B. bets are perfectly hedged and risks are canceled out. C. diversification reduces risk without changing the expected payoff. D. diversification reduces both risk and the expected payoff.