Table 4-1 -Refer to Table 4-1. If the Market Consists of Michelle

question 460

Multiple Choice

Table 4-1
-Refer to Table 4-1. If the market consists of Michelle and Hillary only and the price falls by $1, the quantity demanded in the market increases by

• A)2 units.
• B)3 units.
• C)4 units.
• D)5 units.

Discuss the effectiveness and obstacles of using monetary and fiscal policy to address inflation and recession.

Recognize the potential effects of far-sighted consumer behavior on policy effectiveness.

Understand the concept of political business cycles and the role of monetary policy within these cycles.

Describe the benefits and costs associated with low levels of inflation and the rationale behind targeting zero inflation.

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Definitions:

Diseconomies of Scale

The situation where long-run average costs start to increase as the scale of operation grows beyond a certain point, leading to increased per-unit costs.

Diminishing Returns

A principle in economics indicating that adding more of one factor of production, while holding others constant, will at some point yield lower incremental per-unit returns.

Constant Costs

Costs that remain the same in total, regardless of changes in the volume of goods or services produced.

Average Variable Cost

The total variable costs of production divided by the quantity of output produced; it shows the variable cost per unit.