Suppose that Dianne Lindsay spends all her income on two goods, A and B, in a manner in which the marginal utility to price ratios are not equal, MUa/Pa is greater than MUb/Pb. If at that time the price of A is higher than the price of B, then she
a. is already maximizing her total utility and should make no change
b. should increase her purchases of B and decrease her purchases of A because the price of A is higher
c. should increase her purchases of B and decrease her purchases of A because the marginal utility of A is higher
d. should lower the price of good A relative to good B
e. should increase her purchases of A and decrease her purchases of B
E
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As more output is produced, the marginal product of labor declines
A) because of the law of diminishing returns. B) because the firm's marginal revenue declines. C) if the firm's output supply curve is inelastic. D) if firms reduce the wage paid to labor.
If the Fed sterilizes the purchase of foreign assets,
A) the monetary base is left unchanged. B) the monetary base rises by the amount of the purchase. C) the monetary base falls by the amount of the purchase. D) the monetary base may rise, fall, or remain unchanged depending on the reaction of domestic interest rates to the purchase.