A perfectly competitive firm earns a profit when price is
A) equal to minimum average variable cost. B) above minimum average total cost.
C) equal to minimum average total cost. D) equal to minimum average fixed cost.
B
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When there is an expansionary gap, inflation will ________, in response to which the Federal Reserve will ________ real interest rates, and output will ________.
A. decline; lower; expand B. increase; raise; decline C. decline; lower; decline D. decline; raise; decline
If the economy is entering a recession, what should the Fed do as far as changing interest rates, and how should this affect consumer and business spending?
What will be an ideal response?
A depository institution is a firm that takes deposits from ________ and makes loans to ________
A) households and firms; other households and firms B) firms only; households only C) households only; firms only D) firms only; other firms only
Which of the following best describes the "guiding function" of price?
A) In response to a surplus or shortage in two markets, price serves as a "guiding function" by decreasing in one market and increasing in the other market in the short run. B) The guiding function of price is the movement of resources into or out of markets in response to a change in the equilibrium price of a good or service. C) The guiding function of price occurs when the market price changes to eliminate the imbalance between supply and demand caused by a shortage or surplus at the original price. D) The guiding function usually occurs in the short run while the rationing function usually occurs in the long run.