Refer to the graph shown. In the graph, if the price level is P0 and the aggregate demand curve is AD0, then the economy is in:
A. a recessionary gap.
B. an inflationary gap.
C. a short-run equilibrium but not a long-run equilibrium.
D. a long-run equilibrium.
Answer: D
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In early 2007, Pioneer and JVC, two Japanese electronics firms, each announced that their profits were going to be lower than expected because they both had to cut prices for LCD and plasma television sets
Which of the following could explain why these firms did not simply raise their prices and increase their profits? A) The firms are still making profits, just not as high as expected so there is room to lower prices until one can force the other out of business. B) The move to cut prices is probably just a temporary one to gain market share. In the long run the firms will raise prices and be able to increase their profits. C) Most likely, intense competition between these two major producers probably pushed prices down. Thereafter, each feared that it would lose its customers to the other if it raised its prices. D) In perfect competition, prices are determined by the market and firms will keep lowering prices until there are no profits to be earned.
Vertical integration may be motivated by all of the following except:
a. Upstream market power b. Economies of ever wider spans of managerial control c. Technological interdependencies d. Reduced search and bargaining cost e. The hold-up problem.
If the government imposes a price ceiling, then:
a. producers must charge the ceiling price. b. the price offered by producers must be at or above the ceiling price. c. the price offered by producers must be at or below the ceiling price. d. producers would be inclined to increase the quantity supplied. e. the market supply curve will shift to the right.
Answer the next question based on the following price and output data over a five-year period for an economy that produces only one good. Assume that year 2 is the base year.YearUnits of OutputPrice per Unit18$22103315441855206In year 4, nominal GDP would be ________.
A. $316 B. $60 C. $120 D. $90