Assume both the marginal cost and the average variable cost curves are U-shaped. At the minimum point on the AVC curve, marginal cost must be:
a. greater than the average variable cost.
b. less than the average variable cost.
c. equal to the average variable cost.
d. at its minimum.
QUESTION 2The Keynesian approach to fiscal policy calls for:
a. budget deficits during periods of inflationary pressure.
b. budget surpluses during periods of high unemployment.
c. a balanced budget despite the state of the economy.
d. tax cuts during recession.
e. spending increases during inflation.
QUESTION 3A monopolistic competitive firm in the long run sets price equal to the minimum point on the long-run average cost curve.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 4What is the shape of the average total cost curve for a firm in the short run?
a. U-shaped.
b. A horizontal line.
c. A vertical line.
d. A curve that slopes upward to the right.
QUESTION 5According to Keynes, if private sector demand is insufficient to maintain full employment, the government should:
a. make the economy's natural transition to a lower level of employment as easy as possible.
b. shock the economy with an increase in aggregate demand.
c. reduce aggregate supply to reduce inflation.
d. print money to promote consumer spending.
e. take steps to increase aggregate supply in an economy.
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