In the long run, a firm in monopolistic competition will produce
A) where average total cost is minimized.
B) where price equals average total cost but average total cost is not at its minimum.
C) zero output.
D) any possible amount of output.
E) where price equals marginal cost.
B
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The above table gives the demand and supply schedules for cat food. If the supply increases by 20 tons at every price, what is the new equilibrium price and quantity?
What will be an ideal response?
The experience of Paul Volcker's fight against inflation during the late 1970s and early 1980s indicates that firms and workers
A) had adaptive expectations. B) had rational expectations and that they trusted Fed announcements. C) preferred high unemployment to high inflation. D) Both A and B are correct answers.
Suppose the Federal Reserve wants to increase the money supply. Which combination of actions would lead to the appropriate effect?
a. Increase the discount rate, decrease the reserve ratio, sell bonds. b. Increase the discount rate, decrease the reserve ratio, buy bonds. c. Decrease the discount rate, decrease the reserve ratio, buy bonds. d. Decrease the discount rate, increase the reserve ratio, buy bonds. e. Decrease the discount rate, decrease the reserve ratio, sell bonds.
In an economy with lump-sum taxes and no international sector, assume that the aggregate supply curve is horizontal. If the marginal propensity to consume is equal to 0.8, which of the following will necessarily be true?
(a) The average propensity to consume will be less than the marginal propensity to consume (b) The government expenditure multiplier will be equal to 5 (c) A $10 increase in consumption spending will bring about an $80 increase in disposable income (d) Wealth will tend to accumulate in the hands of a few people (e) The economy will be running a deficit, since consumption expenditure exceed personal saving