question
What is the correct fiscal policy when a recession is caused by a decrease in aggregate demand?
answer
Increase government spending and decrease taxes
question
Firms maximize profit when
answer
marginal revenue=marginal cost
question
marginal revenue
answer
the additional income from selling one more unit of a good; sometimes equal to price
question
marginal cost
answer
the cost of producing one more unit of a good
question
price inelastic
answer
the condition that occurs when demand and supply do not react to price changes; typically occurs when consumers must have the product and have no other alternatives or choices
question
Elasticity of Supply
answer
The change in price causes a large change in supply
question
Comparative Advantage
answer
the ability to produce a good at a lower opportunity cost than another producer
question
opportunity cost
answer
What a person sacrifices by choosing one option over another
Opportunity Cost=FO−CO
FO= Return on best foregone option
Opportunity Cost=FO−CO
FO= Return on best foregone option
question
Absolute Advantage
answer
the ability to produce more of a given product using a given amount of resources
question
In the long run, economic profits are possible in which market structures?
answer
Monopoly and oligopoly
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