Firms are making profits in an increasing-cost industry. Which of the following statements describes what will happen in the long run?
A. Firms will exit this industry, causing the industry supply schedule to shift to the right and the LRAC curve to shift down.
B. More firms will enter this industry, causing the industry supply schedule to shift to the right and the LRAC curve facing firms to shift down.
C. More firms will enter this industry, causing the industry supply schedule to shift to the right and the LRAC curve facing firms to shift up.
D. Firms will exit this industry, causing the industry supply schedule to shift to the left and the LRAC curve to shift down.
Answer: C
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We observe that the price per ounce of milk in a quart container is higher than the price per ounce in a gallon container. What is the likely reason for this?
A. The higher costs of quart containers B. The higher costs of production of milk in smaller quantities. C. Higher transportation costs for smaller container sizes. D. The marginal utility of milk is higher in smaller containers than it is in larger containers.
According to the marginal approach to profit maximization,
a. firms should equate total revenue and marginal cost when choosing the optimal output level b. firms should take any action that increases revenue more than costs c. economic profit is zero in the long run d. marginal cost declines until it reaches marginal revenue at the profit-maximizing output level e. marginal costs eventually diminish as more output is produced
Patricia's nominal annual income in 2009 was $60,000. If the rate of inflation is constant at 10 percent, in order to keep Patricia's real income constant, her nominal income in the year 2010 should be:
A. $60,000. B. $54,000. C. $66,000. D. $70,000.
What are three causes of supply-side inflation?
What will be an ideal response?