In order to maximize profits in the short run, a price taker should always produce at the output level where marginal cost is equal to price.
Answer the following statement(s) true (T) or false (F)
Ans: True
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Suppose that the U.S. exchange rate is expected to fall in the future. As a result, in the foreign exchange market, there will be
A) an increase in the demand for dollars, a decrease in the supply of dollars, and a rise in the equilibrium exchange rate. B) an increase in the demand for dollars, a decrease in the supply of dollars, and a fall in the equilibrium exchange rate. C) a decrease in the demand for dollars, an increase in the supply of dollars, and a rise in the equilibrium exchange rate. D) a decrease in the demand for dollars, an increase in the supply of dollars, and a fall in the equilibrium exchange rate.
The trade-off between coordinating or not coordinating policies for central banks is measured in terms of
A) inflation and the lowered effectiveness of policies. B) wage inflation and increased effectiveness of policies. C) speculative pressure and intra-marginal adjustments. D) fixed and floating exchange rates.
Since income tax revenues will rise (fall) as expenditures and output increase (decrease) the income tax results in
A) a reduction in the multiplier effect on GDP of autonomous expenditures. B) automatic stabilization of GDP. C) A and B. D) None of the above.
Oligopolists are more sensitive to the pricing and output policies of their rivals when
a. all firms produce identical products b. their products are highly differentiated c. there is freedom of entry and exit d. there are barriers to entry e. there are many firms in the industry