If a firm in a perfectly competitive industry lowers its price below the market price, its
A. sales will drop to zero.
B. profit will decrease.
C. total revenue will increase.
D. demand curve will become downward sloping.
Answer: B
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A technological innovation that reduces a firm's marginal cost will lead to:
A. a decrease in the firm's supply. B. an increase in the quantity supplied by the firm, but no change in the firm's supply. C. an increase in the firm's supply. D. a decrease in the quantity supplied by the firm, but no change in the firm's supply.
In trying to control the size of the money stock from day to day, the Fed relies principally on
A) adjustments in legal reserve requirements. B) changes in the central bank discount rate. C) purchases and sales of U.S. government bonds. D) the issue and withdrawal of currency from commercial banks.
According to purchasing-power parity, if prices in the United States increase by a larger percentage than prices in the United Kingdom, then the
a. real exchange rate rises. b. nominal exchange rate rises. c. real exchange rate falls. d. nominal exchange rate falls.
Using the aggregate expenditure-output model, assume the aggregate expenditures (AE) line is below the 45-degree line at full-employment GDP. This vertical distance is called a(n):
A. inflationary gap. B. recessionary gap. C. negative GDP gap. D. marginal propensity to consume gap.