Transfer payments are excluded from government purchases in GDP accounting because:
A. they are difficult to measure.
B. they are a reward to individuals who have been productive their entire lives.
C. they are already included as part of investment.
D. nothing is being produced in return for the payment.
Answer: D
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Why is adverse selection more likely in financial markets when interest rates rise?
A) The remaining borrowers are more likely to be risky. B) Higher interest rates are likely to hurt the economy. C) If firms have to pay higher interest rates, they may choose to use the funds differently than they first intended. D) Banks eliminate risky borrowers by raising interest rates.
Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market. What is the efficient scale of production?
A. 5 gallons per day B. 100 gallons per day C. 20 gallons per day D. 50 gallons per day
In order to raise the most revenue, the government is better off taxing the producers of a good for which demand is elastic
Indicate whether the statement is true or false
Suppose Ben owns a small company that makes kites. The market for kites is perfectly competitive, and kites sell for $25 each. Ben's total production costs vary depending on the number of kites he makes each day, as shown in the accompanying table. Number of kites Per DayTotal Cost Per Day ($)0100111021263148417252006235 When Ben makes 2 kites per day, what is his average variable cost?
A. $63 B. $50 C. $26 D. $13