Suppose a perfectly competitive industry is in long-run equilibrium. If a decrease in demand leads to a higher long-run price, we know that
A. this is an increasing-cost industry.
B. some firms will be losing money in the long run.
C. after further adjustments, price will fall to its original level.
D. this is a decreasing-cost industry.
Answer: D
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In a Bertrand model of oligopoly:
A. firms produce differentiated products and set their prices simultaneously. B. firms produce homogenous products and set their prices simultaneously. C. firms choose how much to produce simultaneously and the price clears the market given the total quantity produced. D. firms choose how much to produce and the price to charge simultaneously.
When demand is price inelastic:
a. price and total revenue move in the same direction. b. price and total revenue move in the opposite direction. c. total revenue increases whether price goes up or down. d. total revenue decreases whether price goes up or down.
A recent study found that the price elasticity of demand for apples is -0.4. This year's early freeze in major apple growing regions has led to a 6% decrease in the apple production (supply) compared to last year. What is the implied change in price expected this year for apples (and assume no apple exports or changes in stocks)?
a. Decrease by 3% b. Decrease by 15% c. Decrease by 24% d. Increase by 15% e. Increase by 24%
Two drawbacks in using fiscal policy as a stabilization tool are that fiscal policy can affect ________ as well as aggregate demand and that fiscal policy is ________.
A. consumption; too flexible B. potential output; offset by automatic stabilizers C. potential output; not flexible enough D. consumption; offset by automatic stabilizers