If the theory behind an economic model fits the data poorly, you would probably want to
A) use the theory to predict what would happen if the economic setting or economic policies change.
B) start from scratch with a new model.
C) enrich the model with additional assumptions.
D) restate the research question.
B
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We know that a perfectly competitive firm is a price taker because
A) its MC curve slopes upward. B) its ATC curve is U-shaped. C) its demand curve is horizontal. D) MC and ATC are equal at the profit-maximizing amount of output. E) it has no supply curve.
The conventional fiscal policy to fight inflation would be to
A. increase the rate of monetary growth. B. decrease the rate of monetary growth. C. run a government surplus. D. run a government deficit.
Under free trade, a large country produces one million leather bags per year and imports another two million bags per year at the world price of $60 per bag. Assume the country imposes a specific tariff of $5 per bag. As a result, the per-unit price of leather bags decreases to $58 in the international market and the import of leather bags drops to 1.6 million. The domestic production, on the other hand, increases to 1.1 million. Following the imposition of the tariff, the domestic consumers pay a price of ________ for each bag.
A. $65 B. $63 C. $60 D. $58
What is a perfectly competitive firm's short-run supply curve?
What will be an ideal response?