Perfect competition is efficient because all the following conditions hold except ________
A. total product is maximized
B. firms maximize profit and produce on their supply curves
C. consumers get a real bargain and pay a price below the value of the good
D. firms minimize their average total cost of producing the good
A Although perfectly competitive firms produce at the minimum average total cost, that result does not mean that the firm's total product is at its maximum. Each firm could produce more, albeit at a higher average total cost.
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The slope of the consumption function is equal to
a. the change in consumption divided by the change in disposable income. b. the change in consumption divided by the change in personal income. c. the change in disposable income divided by the change in consumption. d. the change in national income divided by the change in consumption.
In the model of monopolistic competition, compared to a firm with a higher marginal cost, a firm with a lower marginal cost will set a ________ price, produce ________ output, and earn ________ profits
A) lower; more; more B) higher; more; more C) lower; less; less D) higher; less; less E) higher; less; more
In the Solow growth model, if the level of investment is greater than depreciation at the initial capital-labor ratio , then ?k is ________ and the capital-labor ratio ________ toward the steady-state capital-labor ratio
A) greater than zero; increases B) greater than zero; decreases C) less than zero; increases D) less than zero; decreases
An individual has preferences consistent with prospect theory. The person takes their current wealth of $10,000 (plus any certain additions) as their reference point. Gains above this reference point are worth +1 util. Losses below this reference point are worth -2 utils. The person is faced with two choice problems. The first involves a choice between (A) no gamble and (B) a gamble with an equal
chance of winning $1,800 and losing $1,000 . The second choice problem, the person first has $1,000 taken away (resulting in the adjustment of the reference point). The choice is then between (C) being given back $1,000 for sure and (D) an equal chance of winning $2,800 or nothing. What choices would the person make? a. A and C. b. A and D. c. B and C. d. B and D.