Which of the following is an example of a supply shock?
A. A surge in consumer optimism prompts increased buying of goods and services.
B. A surprise tax rebate from the government gives people more money to spend.
C. A dramatic increase in energy prices increases production costs for firms in the economy.
D. Government increases spending on education.
Answer: C
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As a shoe factory adds more workers, shoe production grows, reaches a maximum, and then shrinks
In a diagram that has the number of workers on the horizontal axis and the number of shoes on the vertical axis, the relationship between the number of workers and the number of shoes starts as ________ and then, after the maximum point, is ________. A) negative; positive B) positive; linear C) positive; negative D) positive; nonexistent E) linear; negative
Which of the following relationships implies that a firm's short-run cost function is linear?
A) MC = AC B) MC = AVC C) AC = AFC + AVC D) MC > AC