“Lower prices are always good for business.” Evaluate this statement.
What will be an ideal response?
This statement is incorrect. Lower prices are not necessarily good for business. In the long run, the level of prices is irrelevant as wages adjust to compensate for price levels, maintaining workers’ purchasing power and the firms’ profits.
In the short run, lower prices or disinflation reduces firms’ profits, as prices are decreasing faster than wages. This causes firms to decrease production and reduce their payrolls, resulting in unemployment and lower than optimal output. These effects can result in an economic recession in the short run.
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An increase in the number of students attending college would tend to
a. reduce the demand for college professors. b. decrease the number of college professors employed. c. increase the demand for college professors. d. reduce the wage for college professors.
Poverty is defined by the U.S. government as having an income equal to or less than three times an average family's minimum food expenditure as calculated by the U.S. Department of Agriculture.
Answer the following statement true (T) or false (F)
Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars) is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. If you make 100 t-shirts, your average total cost is ________.
A. $10 B. $13 C. $3 D. $3.10
Which of the following is FALSE about intraindustry trade?
A) Intraindustry trade creates gains from trade. B) Intraindustry trade is due to comparative advantage. C) Intraindustry trade may involve heightened competition and lower prices for consumers. D) Intraindustry trade increases consumer choice.