Comment on the following statement: "Firms should maximize the difference between marginal revenue and marginal cost."
What will be an ideal response?
The statement is false. Firms should maximize profit, which is the difference between total revenue and total cost. At the profit-maximizing level of output, marginal revenue is equal to marginal cost.
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If the MPC is 0.9, then the government spending multiplier is:
a) 0.1 b) 1.11 c) 9 d) 10
Which of the following will most likely cause an outward shift in the production possibilities curve?
a. a reduction in the man-made productive resources available to the economy as the result of a decline in investment b. an increase in government payments to farmers for taking land out of production c. an increase from 40 to 50 hours in the average number of hours worked per week d. None of the above would cause an outward shift in the production possibilities curve.