Why doesn’t a competitive firm reduce its price below the industry price to increase sales?
What will be an ideal response?
A competitive firm can sell all it wishes at the going industry price; that is the meaning of a horizontal demand curve. There would be no point to charging less if one can sell all one wants at a higher price. Furthermore, such a policy would result in losses in the long run, where industry price results in zero economic profits and any lower price would result in losses.
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A small increase in the annual rate of economic growth can lead to a larger increase in growth over time due to the effects of
A) the money supply. B) compounding. C) regression towards the mean. D) averaging.
Exhibit 7-14 Cost curves
In Exhibit 7-14, a firm finds that it is experiencing numerous managerial and information problems. The position of its short- and long-run average total cost curves suggest that it is operating at a production level:
A. between 0 and 1,000. B. between 1,000 and 2,000. C. between 2,000 and 3,000. D. between 3,000 and 4,000.
Cost-push inflation occurs because of a:
A. rightward shift in the aggregate demand curve. B. leftward shift in the aggregate demand curve. C. leftward shift in the aggregate supply curve. D. rightward shift in the aggregate supply curve.
Which of the following income maintenance programs is designed to establish nationwide minimum incomes for the aged, the blind, and the disabled?
A) the Old-Age Survivors' and Disability Insurance (OASDI) program B) the Supplemental Security Income (SSI) program C) the Temporary Assistance to Needy Families (TANF) program D) the food stamps program