In the short run average costs eventually ________ because of diminishing returns, and in the long run average costs eventually ________ because of diseconomies of scale.
A. decrease; decrease
B. decrease; increase
C. increase; increase
D. increase; decrease
Answer: C
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Any factor that shifts the demand curve to the left but does not affect the supply curve will lower the equilibrium price and raise the equilibrium quantity.
Answer the following statement true (T) or false (F)
The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.
In the long run, a year-long drought that destroys most of the summer's wheat crops causes permanently:
A. higher prices. B. lower prices. C. lower output. D. None of these is true.
From a macroeconomic perspective, the problem of low household saving has probably been overstated because:
A. household saving represents a smaller share of national saving than does public saving. B. it is national saving, not household saving, that allows an economy to accumulate new capital. C. household saving is not related at all to an economy's ability to accumulate new capital. D. household saving has been increasing steadily over the last three decades.