What is TRUE about every point along a production possibilities frontier?
A) Both people are maximizing utility.
B) It is impossible to increase production of either good.
C) All allocations are efficient.
D) It includes some unattainable points.
C
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The hypothesis stating that people combine the effects of past policy changes on important economic variables with their own judgment about the future effects of future and current policy changes is known as
A) policy irrelevance hypothesis. B) rational expectations hypothesis. C) life cycle hypothesis. D) real business cycle hypothesis.
Lin is maximizing total utility while consuming food and clothing. Her marginal utilities of food and clothing are 50 utils and 25 utils, respectively. If clothing is priced at $10 per unit, the price of a unit of food
a. must be rising b. must be falling c. must equal $10 as well d. must equal $20 e. cannot be determined without additional information.