Which assumption(s) is (are) necessary for an efficient allocation of resources among firms?
A. Firms behave so as to maximize their profits.
B. All firms pay the same prices for inputs.
C. Factor markets are open and competitive.
D. All of the above are correct.
Answer: D
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A local newspaper headline states "Congress Votes Against President's Proposed Tax Increase." An economist would interpret the statement as
A) a sad event, because all economists favor tax cuts. B) uninteresting, because all economists favor theories instead of reality. C) a purely political issue not related to economics. D) a shorthand way of saying, "More individuals in Congress voted against the tax cut compared to the number of individuals who voted in favor of the tax cut."
Unit taxes cause shifts, while ad valorem taxes cause pivots.
A. True B. False C. Uncertain
What is the Coase Theorem? What are transaction costs?
Government stabilization policy
a. cannot influence investment spending. b. can stimulate aggregate demand and thereby induce businesses to invest, but the amount is not totally predictable. c. can stimulate aggregate demand, but investment spending will not be affected. d. can stimulate aggregate demand, but only in the long run.