In a grim-trigger strategy, a firm responds to underpricing by choosing a price so low that each firm makes zero economic profit.
Answer the following statement true (T) or false (F)
True
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Perfectly competitive firms are earning economic profits at a market price of $18 and an average total cost of $15. If new firms enter and increase the average total cost for all firms, the market price will ________ until ________.
A) fall; it reaches the new lower average total cost B) increase; it reaches the new higher average total cost C) fall; it reaches the new higher average total cost D) increase; economic profits are equal to zero
Which of the following would move the economy down and to the right along a short run Phillips Curve? a. Increases in the required reserve ratio by the Fed
b. Increases in taxes by the federal government. c. Increases in the interest rate that the Fed pays on bank reserves. d. All of the above.
In many cases, tax loopholes are designed by Congress to
a. give special treatment to specific types of behavior. b. reduce the overall administrative burden of the tax system. c. raise revenues for special projects. d. All of the above are correct.
The price of a stock will increase, ceteris paribus, when
A. Future earnings expectations decrease. B. Terrorists cause people to be fearful. C. Consumer confidence increases. D. The interest rate increases.