If a profit-maximizing, perfectly competitive firm is producing at a loss in the short run, then it implies that:
a. marginal revenue must be less than marginal cost.
b. price must be less than the average variable cost.
c. price must be less than average total cost but greater than average variable cost.
d. the average revenue curve must lie below the average variable cost curve but above the average fixed cost curve.
e. price must be less than both average variable cost and average fixed cost.
c
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Explain whether you agree or disagree with the following statement: "The reason that inflation is bad is because it increases the cost of living — the costs of goods and services we buy — without increasing income in general."
What will be an ideal response?
If there is an increase in government spending that is financed by issuing bonds, then
a. interest rates should rise which increases private investment. b. interest rates will remain the same unless taxes are reduced as well. c. interest rates should fall which increases private investment. d. interest rates should rise which decreases private investment. e. None of the above.
Assuming that the increase in the value of the dollar in the foreign exchange market has a greater impact on aggregate demand than on aggregate supply, an increase in the United States budget deficit will raise Real GDP
A) more in an open economy than in a closed economy. B) more in a closed economy than in an open economy. C) to the same level irrespective of whether it is a closed or an open economy. D) none of the above (i.e. Real GDP will decrease)
The term "open market operations" refers to the:
A. loan-making activities of commercial banks. B. effect of expansionary monetary policy on interest rates. C. operation of competitive markets in the banking industry as the result of deregulation. D. buying and selling of government securities by the Federal Reserve.