The result that perfectly competitive firms produce at the lowest per-unit cost is derived from the assumptions of
A. homogeneous products.
B. few sellers.
C. firms facing horizontal demand curves.
D. free entry and exit.
Answer: D
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In 1996, an advisory commission, appointed by the Senate Finance Committee, estimated that, due to certain distortions, the CPI overstates inflation by
a. .5 percentage points per year. b. 2.0 percentage points per year. c. 1.1 percentage points per year. d. .25 percentage points per year.
If the amount that consumers wish to save at the full employment level of income is greater than the amount that businesses plan to invest, then
a. there will be an inflationary gap. b. there will be a recessionary gap. c. total demand will exceed potential GDP. d. the economy will move to a higher level of output.
The inflationary premium is that portion of the interest rate that reflects
a. the real return derived by lenders. b. the rush to buy goods before prices rise. c. the expected annual rate of decline in the purchasing power of money while a loan is outstanding. d. the price that one must pay for earlier availability of goods and services during a period of price stability.
Which of the following will not cause an increase in demand for good X?
What will be an ideal response?