In the long run, a year-long drought that destroys most of the summer's wheat crops causes permanently:
A. higher prices.
B. lower prices.
C. lower output.
D. None of these is true.
Answer: D
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When the firm in the figure above maximizes its profit, it earns an economic profit of
A) $3,125. B) $6,250. C) $9,375. D) $5,625. E) None of the above answers are correct because the firm incurs an economic loss.
If social returns to the production of a good are greater than private returns, then we can conclude that relative to the social optimum, the good will be
A) over produced and under priced. B) under produced and over priced. C) over produced and over priced. D) under produced and under priced. E) None of the above.
According to the quantity theory of money, increasing the money supply:
A. leads to inflation. B. causes production to increase. C. leads to decreased spending. D. causes each dollar to be spent less often.
If a good is normal and income increases, then
A. the demand curve will shift to the right. B. the supply curve will shift to the left. C. the supply curve will shift to the right. D. the demand curve will shift to the left.