In an industry with free entry and exit, positive economic profit:
A. indicates a market failure.
B. can be sustained indefinitely.
C. cannot be sustained indefinitely.
D. can never occur.
Answer: C
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John and Sally have identical preferences except that Sally's utility is exactly 10 times John's for each basket of goods. If they have the same income and face the same prices
A) Sally will consume 10 times the amount that John consumes. B) Sally will receive 1/10 the satisfaction of John. C) both will consume the same amount of all goods. D) John and Sally will have equal total utility.
Suppose that you could buy a one-year bond today, which has an interest rate of 3%. If you wait a year and buy a one-year bond then, the interest rate will be 4%. Two years from now, a one-year bond is expected to offer an interest rate of 5%
According to the expectations theory of the term structure of interest rates, what is the interest rate on a two-year bond today? What is the interest rate on a three-year bond today?
In the long run, firms in many industries often experience a falling average total cost curve as a result of:
a. gains through trade. b. increasing marginal returns. c. economies of scale. d. lower fixed costs.
The more the current price exceeds the equilibrium price, the:
A. smaller the resulting shortage will be. B. smaller the resulting surplus will be. C. greater the resulting surplus will be. D. greater the resulting shortage will be.