When taxes decrease, consumption
a. decreases as shown by a movement to the left along a given aggregate-demand curve.
b. decreases as shown by a shift of the aggregate demand curve to the left.
c. increases as shown by a movement to the right along a given aggregate-demand curve.
d. increases as shown by a shift of the aggregate demand curve to the right.
d
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In the text, the authors present evidence that the market for free agents in professional baseball is subject to the lemons problem. How could a prospective free agent overcome this problem when seeking a new contract?
A) Agree to accept a lower salary with a new team. B) Rely on standardization to avoid the asymmetric information problem. C) Decide to negotiate only with their current team. D) Develop a reputation as a reliable and productive player.
Suppose a perfectly competitive firm faces the following short-run cost and revenue conditions: ATC = $8.00; AVC = $5.00; MC = $8.00; MR = $9.00. The firm should
A) decrease output. B) increase output. C) increase price. D) continue to produce its current output.
Based on the above scenario, is the industry in the long run equilibrium?
a. yes, because all firms are producing at P=MR=MC b. no, because the price is still greater than the minimum average total cost. c. cannot answer because need information on MR d. cannot answer unless we see that the market lets some firms enter and/or some firms exit.
If resource prices are flexible, the long-run aggregate supply curve is vertical.
a. true b. false