When firms earn below normal rates of return
A. they raise their prices to increase their profits.
B. they tend to leave the industry and seek profits elsewhere.
C. they tend to stay in the industry in anticipation of other firms leaving the industry.
D. they are still breaking even economically.
Answer: B
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A normal good is a good whose quantity demanded
A. rises when its price falls. B. falls when the price of a related good falls. C. falls when the consumer’s total utility rises. D. rises when the consumer’s real income increases.
A snowplow will generate a net income of $2,000 per year for its owner. After 8 years, the plow will break down and have zero value. The maximum amount of money anyone would pay for the plow is
a. less than $2,000 b. $2,000 c. between $2,000 and $16,000 d. $16,000 e. more than $16,000
Economists define inflation as
a. The price of necessities like food and gasoline. b. How fast on average prices are rising in a given period of time c. The value of the dollar d. Average house prices in a given area
A shift away from expenditures on domestic goods and a shift toward expenditures on foreign goods when the domestic price level increases is known as
A. the open economy effect. B. demand side inflation. C. the real-balance effect. D. the interest rate effect.