The short-run market supply curve in a perfectly competitive industry
a. shows the total quantity supplied by all firms at each possible price
b. is perfectly inelastic at the market price
c. is perfectly elastic at the market price
d. shows how much output each individual firm will supply at various possible prices
e. is usually downward sloping
A
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A free market fails when
A) firms that produce goods which create positive externalities go bankrupt. B) firms that produce goods which create negative externalities earn high profits. C) there is an external effect in either production, consumption, or both. D) there is government intervention.
Suppose the economy is initially in long-run and short-run equilibrium. If the Fed decides to pursue a contractionary monetary policy, we will see
A) bond prices fall, interest rates fall, aggregate demand remains unchanged as consumption spending decreases, but investment spending increases. GDP remains constant in both the short run and the long run, but the price level falls in both. B) bond prices fall, interest rates rise, aggregate demand falls as investment and consumption spending decrease, and real GDP and the price level decreasing in the short-run, but only the price level decreasing in the long run. C) bond prices fall, interest rates rise, aggregate demand falls as investment spending decreases and consumption spending remains unchanged, and real GDP and the price level decrease in the short run, but only the price level falls in the short run. D) interest rates rise but no change in bond prices. Aggregate demand falls as consumption spending and investment spending decrease, and the price level and real GDP fall in both the short run and the long run.
In the graph for welfare effects of a deficiency payment plan, the output is ______.
a. lowered below the efficient level b. raised above the efficient level c. raised up to the efficient level d. lowered down to the efficient level
Which of the following is not an example of the issue of time inconsistency?
A) a central bank announced to maintain low inflation and at the same time increased money supply B) a government stated that they will not negotiate with hostage takers. When someone is taken hostage, it negotiates C) a mom says to her kids no cookie before meals and she never gives cookies before her kids eat their meals D) a person on diet eats ice cream for dinner