(Consider This) Some economists believe that modest inflation, say 2-3 percent, might help reduce unemployment during recessions. Which of the following best explains their argument?
A. Inflation will cause workers' real income to decline, encouraging them to work harder to
find more and better employment.
B. Higher prices will increase firm profitability, making them want to hire more workers.
C. Higher prices will correspond with higher wages, which will stimulate demand and
employment.
D. Anticipating this inflation, consumers will increase spending to beat the price increases,
increasing demand, output, and employment.
B. Higher prices will increase firm profitability, making them want to hire more workers
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Refer to Figure 3.2. At any consumption bundle with the quantity of good X exceeding the quantity of good Y (that is, a bundle located below the 45 degree line, like point A), Alvin's marginal rate of substitution of good X for good Y is
A) diminishing. B) positive. C) constant and positive. D) zero.
Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as
a. average revenue exceeds marginal cost. b. average revenue exceeds average total cost. c. marginal revenue exceeds marginal cost. d. marginal revenue exceeds average total cost.