Suppose Doug doubles the number of workers, the amount of ingredients and all the other inputs he uses to make donuts. If the number of donuts produced in his donut shop goes up by 80%, which of the following best describes his production function?

a.it does not have returns to scale

b.it has constant returns to scale

c.it has increasing returns to scale

d.it has decreasing returns to scale

Suppose that consumers decide to buy more donuts and less beer. As a result, Doug expands production at his donut shop while Bob lays off workers at his brewery. What is this an example of?

a.frictional unemployment created by a sectoral shift in supply

b.cyclical unemployment created by a recession

c.frictional unemployment created by a sectoral shift in demand

d.structural unemployment created by efficiency wages

Which statement best illustrates the medium of exchange function of money?

a.Thelma uses a $5 bill to buy a coffee and a donut

b.Louise takes out a $25,000 loan to buy a car

c.Doug uses his credit card to buy a case of beer

d.Bob keep some money hidden under his bed

Suppose the value of money has fallen. What has happened to the number of dollars needed to buy a representative basket of goods?

a.it increases, and so the price level falls

b.it decreases, and so the price level falls.

c.it decreases, and so the price level rises

d.it increases, and so the price level rises