Even if two competitive firms in the same market have different production technologies, they will each earn long-run zero profits. Why?
What will be an ideal response?
The firm that has more productive resources will have the cost of those resources bid up by the marketplace. The more productive the resource, the more expensive it will be. This price is bid up until the firm's profits are zero. The firm with less productive resources will also have zero profits because it is not paying as much for its resources. There is no such thing as a free lunch or a free productivity gain for competitive firms.
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If a $10 sales tax is imposed on a good and the equilibrium price increases by $10, the tax is
A) split between buyers and sellers but not evenly. B) paid fully by sellers. C) paid fully by buyers. D) split evenly between buyers and sellers. E) perhaps split between buyers and sellers but it is impossible to determine the incidence without further information.
If total spending is less than the value of total output, firms
a. may decide to cut prices. b. may increase production levels. c. will tend to raise prices. d. will notice inventories falling.
If the government wishes to increase GDP by $1,000b, and the MPC is 0.6, it should increase its spending by:
A. $400b. B. $1,000b. C. $600b. D. $250b.
Martin Shore lost his job when General Motors closed down its local plant. He has been visiting the personnel offices of the other factories in the area, looking for a new job. He is:
A. a member of the civilian labor force who is employed. B. a member of the civilian labor force who is unemployed. C. a member of the civilian labor force who is underemployed. D. a discouraged worker who is not a member of the labor force.