If firms are price setters, a small decline in the demand for their outputs will cause them to
A. reduce output in the short run, but reduce price in the long run.
B. increase price in the short run to offset the effect on profits of a decline in output.
C. reduce price and reduce the level of output produced.
D. reduce price in the short run, but reduce output only in the long run.
Answer: A
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For each of the following changes, explain what will happen to the expected marginal product of capital curve or the user cost of capital curve, and what will happen to the desired capital stock:
a. The real price of capital goods increases. b. The depreciation rate increases. c. The corporate income tax rate decreases. d. The real interest rate decreases. e. Expected future output decreases.
Weak economies with shrinking incomes tend to buy more of everything, including imports
a. True b. False
The human skills theory is similar to the factor abundance theory of explaining the source of comparative advantage, except that the former concentrates only on different aspects of labor
a. True b. False Indicate whether the statement is true or false
When all prices are set equal to marginal costs,
A. consumers buy more than they should. B. consumers will get less utility. C. markets are giving correct signals to consumers. D. producers make excessive profits.