All the supply of peppermint oil is produced from mint plants grown in one county by several competitive growers (the number of growers is not limited). The quality of land in the county varies greatly
Would you expect the long-run market supply curve to slope upward, downward, or remain constant? Why?
The long-run market supply curve will slope up because the growers have different costs. Those growers with poor-quality land have a higher average cost of production. The horizontal sum of the individual supply curves will slope up.
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A firm produces its product using both capital and labor. When it does not change its capital usage, but doubles its labor input, its output increases by less than 50 percent. Which of the following is the most likely explanation of this finding?
A) the principle of opportunity cost B) the spillover principle C) the principle of diminishing returns D) the marginal principle
In the long run, following a combination of a negative demand shock and a temporary negative supply shock, ________
A) both inflation and output return to the original long-run equilibrium values B) inflation is permanently increased, while output returns to potential output C) output returns to potential output, while inflation may be higher or lower than its initial value D) inflation is permanently reduced, while output returns to potential output E) none of the above
Based on the figure below. Starting from long-run equilibrium at point C, a decrease in government spending that decreases aggregate demand from AD1 to AD will lead to a short-run equilibrium at__ creating _____gap.
A. B; no output B. D; an expansionary C. B; recessionary D. D; a recessionary
Explain the process that drives the economic profit to zero in the long run for a perfectly competitive firm
What will be an ideal response?