How do economic profits and losses allocate resources in an economy?
What will be an ideal response?
When positive economic profits exist in an industry, resources flow to that industry because of the profits available. This behavior causes resources to flow from less productive uses to more productive uses. That is, businesses seek to improve their profits and in so doing, they move resources into the production of goods and services that society values the highest. Similarly, when firms face economic losses, they exit the industry and put their resources to more profitable uses. Again, this allocates resources to industries that produce goods and services that society values the highest.
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According to the BEA, in the second quarter of 2011 nominal GDP was $15 trillion and in the second quarter of 2012 nominal GDP was $15.6 trillion. Based solely on this information, from the second quarter of 2011 to the second quarter of 2012
A) real GDP may have increased, decreased, or stayed the same. B) real GDP definitely increased. C) real GDP definitely decreased. D) prices definitely increased.
Unlike a perfect competitor, a monopolist faces the market demand curve
Indicate whether the statement is true or false
Many of the world's poorest nations have Gini coefficients lower than in the U.S
Indicate whether the statement is true or false
Based on the figure below. 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. D; an expansionary B. B; no output C. B; expansionary D. A; a recessionary