Assume that an economy producing two products, skateboards and in?line skates, is initially in equilibrium, and that skateboards and in?line skates are substitutes. If consumer preferences shift away from skateboards and toward in?line skates, which of the following will not occur?
A. In the short run, firms producing skateboards will incur losses.
B. Additional capital will begin to flow into skateboard production in the long run.
C. In the short run, firms producing in?line skates will earn a profit.
D. Additional capital will begin to flow into in?line skates production in the long run.
Answer: B
You might also like to view...
In perfect competition, as the long run approaches, economic profit will cause
a. the entry of new firms, shifting the market supply curve to the right b. the emergence of powerful monopolistic corporations c. inflation d. technological innovation e. government regulation
Offering goods that are similar to competitors' products but more attractive in some ways is called:
A. product distinction. B. price-point pinning. C. product differentiation. D. deceptive advertising.
Refer to the accompanying figure.
Starting from long-run equilibrium at point C, an increase in government spending that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ creating ________ gap.
A. A; a recessionary B. B; no output C. B; expansionary D. D; an expansionary
Which of the following will cause a change in the exchange rate?
A) changes in real interest rates B) changes in consumer preferences C) changes in the perception of economic stability D) all of the above