In the long run, which of the following is true?
A. Profit effects are larger than cost effects.
B. Cost effects offset price effects.
C. Cost effects are larger than profit effects.
D. None of the choices are correct.
Answer: B
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What is the aggregate demand multiplier and why does it occur?
What will be an ideal response?
Assuming the existence of economies of scale, if a firm finds that it can reduce its unit cost by decreasing its scale of production, it means that
A) it has too much production capacity relative to its demand. B) it should try to produce less. C) the law of diminishing returns has not taken effect. D) it has too much fixed overhead relative to its variable cost.
In a market system, what must take place for quantity demanded to continually be equated with quantity supplied?
A) Price controls must be applied by governments. B) Relative prices must be able to adjust to market clearing levels. C) Tastes and preferences of consumers must adjust to eliminate surpluses or shortages. D) Businesses must engage in involuntary, unprofitable exchanges to eliminate surpluses or shortages.
When stock prices reflect fundamental values:
A. all investors will have positive returns. B. all companies will have an easier task of obtaining financing for investment projects. C. the allocation of resources will be more efficient. D. the overall level of the stock market should move higher.