Costs increase with output in an increasing-cost industry because:
A. input prices increase as the industry competes for scarce resources.
B. firms may be forced to use less productive inputs.
C. the firms become monopolies.
D. Both input prices increase as the industry competes for scarce resources and firms may be forced to use less productive inputs are correct.
Answer: D
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If aggregate expenditure is greater than GDP, how will the economy reach macroeconomic equilibrium?
A) Inventories will rise, and GDP and employment will rise. B) Inventories will decline, and GDP and employment will rise. C) Inventories will rise, and GDP and employment will decline. D) Inventories will decline, and GDP and employment will decline.
E(ui Xi) = 0 says that
A) dividing the error by the explanatory variable results in a zero (on average). B) the sample regression function residuals are unrelated to the explanatory variable. C) the sample mean of the Xs is much larger than the sample mean of the errors. D) the conditional distribution of the error given the explanatory variable has a zero mean.