Refer to the accompanying figure. Suppose all the sellers in this market started out charging a price of $45 per unit. What is the most likely result?
A. They would lower their prices because at $45 there would be excess demand.
B. They would all make a large profit because $45 is more than the equilibrium price.
C. They would lower their prices because at $45 there would be excess supply.
D. They would all just break even because $45 is their reservation price.
Answer: C
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When the monopolistically competitive firm shown in the above figure is at its long-run equilibrium, it will be
A) producing the efficient scale of output and is at point A on the ATC curve. B) producing more than the efficient scale of output and is at point C on the ATC curve. C) producing at less than the efficient scale of output and is at a point such as F on the ATC curve. D) producing the efficient scale of output and is at point B on the MC curve.
The concept of inferior goods can be used to show that
A) lower prices signal poorer quality. B) indifference curves can have positive slopes. C) being able to consume more of all goods does not mean that a person will consume more of every good. D) consumers will always buy more of all products if their incomes increase.
Refer to Table 11-2. Calculate the GDP per capita for each country in the table. Which country has the highest standard of living? Why?
What will be an ideal response?
The new Keynesians believe that the economy is not always in equilibrium because:
a. of the existence of voluntary unemployment. b. the Federal Reserve policy is too restrictive. c. government intervention destabilizes the economy. d. of the existence of wage and price rigidities. e. the rate of inflation is too high.