Answer the following statement(s) true (T) or false (F)
1. Once entry and exit have driven economic profits to zero, the demand curve and average total cost curve will be tangent to each other.
2. In monopolistic competition, increasing output to lower average total cost is unprofitable.
3. In monopolistic competition, the tendency is for an industry to have too few firms.
4. With monopolistic competition, society is willing to pay more for the product than it costs society to produce it.
5. With monopolistic competition, firms fail to meet allocative efficiency because marginal cost is more than price.
1. TRUE
2. TRUE
3. FALSE
4. TRUE
5. FALSE
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________ choose the quantities of goods and services to produce, while ________ choose the quantities of goods and services to buy
A) Households; firms B) Firms; households and the government C) The government; firms D) Firms; only households E) Households; the government
Suppose that the number of jobs in the fishing industry decreases but the number of jobs in the travel industry increases. Initially, ________
A) the economy remains at full employment B) structural unemployment increases C) there is a shortage of workers in both sectors D) cyclical unemployment increases
Answer the following statements true (T) or false (F)
1. As the economy expands, it requires less and less investment. 2. Keynes described a horizontal short-run aggregate supply curve when output can be increased by using unemployed resources. 3. As income increases, the absolute level of planned consumption will increase. 4. Keynes recommended the use of government deficit spending to overcome widespread unemployment. 5. A composite aggregate supply curve is horizontal at low levels of output, then upward sloping for higher levels of output until output reaches capacity and the AS curve becomes vertical.
The Fed sometimes works to partly offset or even neutralize the effects of fiscal policy with monetary policy
a. True b. False Indicate whether the statement is true or false