Which of the following is not an assumption that we make in analyzing pure competition in the long run?
A. Firms are free to enter into, or exit from, a purely competitive market
B. We may talk about a "representative" firm, by assuming that competitive firms all have identical cost curves
C. Firms may increase output by expanding their plant sizes
D. Profits are not relevant to firm behavior anymore, because competitive firms earn zero profits in the long run
D. Profits are not relevant to firm behavior anymore, because competitive firms earn zero profits in the long run
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If real GDP exceeds potential GDP, then the unemployment rate ________ the natural unemployment rate
A) is greater than B) equals C) is less than D) The premise of the question is incorrect because the relationship between real GDP and potential GDP has nothing to do with the relationship between the unemployment rate and the natural unemployment rate. E) The premise of the question is incorrect because real GDP can never exceed potential GDP.
In the formula used to measure the growth rate of multifactor productivity, the contribution of labor is represented by
A) bn. B) bk - bn. C) y - bk. D) (1 - b)n.
Explain whether each of the following variables is a lagging, leading, or coincident indicator: In each case, is the economy likely in a recession, heading for a recession, in an expansion, or heading for an expansion?
a. Industrial production is falling. b. The number of building permits issued for new private housing units begins to decline. c. The number and amount of commercial and industrial loans start to rise. d. The average prime interest rate charged by banks begins to fall. e. The M2 money supply begins to rise.
Describe an arms race in economic terms. Is it rational for countries to participate in an arms race?
What will be an ideal response?