Exhibit 7-3 Cost per unit curves
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If the price of the firm's product in Exhibit 7-3 is $1.50 per unit, which intersects AVC at point B, the firm should:
A. continue to operate because it is earning a positive economic profit.
B. stay in operation for the time being even though it is making an economic loss.
C. shut down temporarily.
D. increase the price.
Answer: B
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Which of the following is the best place to set funds aside for "surprise" expenditures?
What will be an ideal response?
All other factors being constant, a reduction in price tends to cause which of the following?
A) an increase in supply and an increase in demand B) a reduction in supply and an increase in demand C) an increase in quantity supplied and a reduction in quantity demanded D) a reduction in quantity supplied and an increase in quantity demanded
Answer the following questions true (T) or false (F)
1. The short-run aggregate supply curve is vertical. 2. When potential GDP increases, short-run aggregate supply also increases, but long-run aggregate supply does not change. 3. An adverse supply shock causes the short-run aggregate supply curve to shift left, increasing the price level.
In a market economy, uncertain levels of inflation
A) make prices less useful as signals for resource allocation. B) prompt firms to enter into fewer short-term contracts, and more long-term contracts, with suppliers. C) balance out income redistribution in the long run. D) are more beneficial to lenders than to borrowers, as lenders have a tendency to overestimate the expected inflation rate.