When a profit-maximizing firm in a competitive price-searcher market is in long-run equilibrium, price equals
a. marginal cost, and profits are positive.
b. average total cost, and profits are zero.
c. marginal cost, and profits are zero.
d. average total cost, and profits are positive.
B
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The problem with the traditional macroeconomic treatment of expectations of inflation is that
A. the model is not consistent with the microeconomic assumption that individuals are rational, forward-looking people. B. the way people formulate expectations in that model assumes that individuals are highly sophisticated in their economic thinking. C. in the model people always assume that inflation will be zero. D. the model assumes that individuals will merely guess at what the inflation rate will be.
When the marginal rate of return expected from a purchase of equipment is less than the market interest rate, then the firm should
a. seek government assistance in decreasing the market interest rate b. inform stockholders that the company can expect increased earnings from the purchase c. either purchase or not purchase the equipment depending on the marginal resource cost of the equipment d. purchase the equipment e. not purchase the equipment
The United States is a mixed economy because there is a ______________________ sector and a _______________ sector.
Fill in the blank(s) with the appropriate word(s).
Purchasing power parity's assumption that the real exchange is constant
A) is correct in nearly all instances. B) would be correct were it not for the existence of trade barriers. C) is not reasonable. D) is correct for trade between the United States and Japan, but incorrect in most other bilateral trading relations.