Based on the figure below. Starting from long-run equilibrium at point C, a tax cut that increases aggregate demand from AD to AD1 will lead to a short-run equilibrium at point ________ and eventually to a long-run equilibrium at point ________, if left to self-correcting tendencies. 
A. D; C
B. B; C
C. B; A
D. D; B
Answer: D
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A firm in monopolistic competition maximizes its profit by ________
A. differentiating its good and producing the quantity at which price equals marginal revenue B. producing the quantity at which marginal revenue equals marginal cost and then adding a markup C. raising its price and producing so that it always has excess capacity D. producing the quantity at which marginal cost equals marginal reve-nue and charging the highest price at which it can sell that quantity
A credit market instrument that requires the borrower to make the same payment every period until the maturity date is known as a
A) simple loan. B) fixed-payment loan. C) coupon bond. D) discount bond.
A firm seeking to maximize economic profits should produce at the output at which
A) total revenue equals total cost. B) marginal revenue equals marginal cost. C) average revenue equals average cost. D) marginal revenue equals average revenue.
A situation in which one party makes a contractual agreement with a second party in the expectation that the second party will act on its behalf is known as
a. an adverse selection relation b. a signaling relation c. an authority relation d. a principal-agent relation e. a nonmarket relation