In a perfectly competitive industry, assume there is a permanent increase in demand for a product. The process of transition to a new long-run equilibrium will include:
a. the exit of firms.
b. temporarily lower production costs.
c. both a and b.
d. neither a nor b.
d
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Shortages normally accompany an effective price floor.
Answer the following statement true (T) or false (F)
Low demand consumers are indifferent between second degree and first degree price discrimination.
Answer the following statement true (T) or false (F)
In a system of flexible exchange rates, expansionary monetary policy abroad would induce
a. a rise in the U.S. exchange rate. b. a fall in the U.S. rate of exchange. c. a balance of payments surplus for the United States. d. no change in U.S. exchange rates.
In reality international trade is determined solely by comparative advantage and the free market forces of supply and demand
a. True b. False Indicate whether the statement is true or false