In the long run, a monopolistically competitive firm
A) earns zero economic profit.
B) produces at minimum average cost.
C) operates at full capacity.
D) All of the above.
A
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A firm produces output according to the production function, q = L4/3K1/2 and faces input prices equal to w = $20 and r = $80. What is the minimum cost of producing 1140 units of output?
A) Cost = $780. B) Cost = $694 C) Cost = $2,071. D) Not enough information is given to answer this problem.
In the income-expenditure model, inventories are:
A. constantly changing and provide insight into the future of the economy. B. a long-run event that aids forecasters in understanding where long-run real GDP is. C. fixed and therefore provide little insight into the direction of the economy. D. often positive, suggesting that additions to inventory stocks are a long-run goal.
Samantha goes to the grocery store to make her monthly purchase of ginger ale. As she enters the soft drink section, she notices that the price of ginger ale has increased 15 percent, so she decides to buy some peppermint tea instead. To which problem in the construction of the CPI is this situation most relevant?
a. substitution bias b. introduction of new goods c. unmeasured quality change d. income effect
Which of the following would make a reasonable hypothesis to test?
A) Rising inflation is bad for the U.S. economy. B) An inflation rate above 4% is dangerous for the British economy. C) As interest rates increase, eventually the inflation rate will decline. D) Increases in inflation are worse for the U.S. economy than are increases in public sector borrowing.