19)
Explain the concept of diminishing returns.
20)
You are running a small yard maintenance business for the summer. What do you
expect to happen to the number of yards you can maintain in a day as you add
workers if you don’t purchase more capital equipment (like mowers and leaf
blowers)?
2.5 The Real-Nominal Principle
1)
The real-nominal principle states that
A)
people respond more to explicit, or real, costs than to implicit costs.
B)
people respond more to implicit costs than to explicit costs.
C)
what matters to people is the face value of money or income.
D)
what matters to people is the purchasing power of money or income.
2)
The principle that states that what matters to people is the real value or
purchasing power of money is the
A)
marginal principle.
B)
principle of diminishing returns.
C)
spillover principle.
D)
real-nominal principle.
3)
The face value of money or income is called its ________ value.
A)
real
B)
marginal
C)
nominal
D)
external
4)
The value of money or income in terms of the quantity of goods the money can
buy is called its
A)
real value.
B)
marginal value.
C)
nominal value.
D)
implicit value.
5)
The real value of money
A)
is another word for the face value.
B)
reflects the purchasing power of money.
C)
matters less to people than its nominal value.
D)
is the same as its nominal value.
6)
If real salaries increase but nominal salaries do not, this means that
A)
the purchasing power of money has decreased.
B)
prices have not changed.
C)
prices have risen.
D)
prices have fallen.
7)
If real salaries decrease but nominal salaries do not, this means that
A)
the purchasing power of money has increased.
B)
prices have not changed.
C)
prices have risen.
D)
prices have fallen.
8)
A Major League Baseball player signs a contract that pays $27 million over 5
years. The $27 million is the contract’s ________ value.
A)
real
B)
implicit
C)
external
D)
nominal