If all firms are identical, output demand shifts cannot cause changes in output price in the long run.
Answer the following statement true (T) or false (F)
True
Rationale: When firms are identical, the long run supply curve is horizontal -- implying that price will always return to its original price as demand changes.
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Which of the following is an example of natural monopoly?
A) cellular phone companies in a large city B) local water utility companies C) major league sports franchises in the largest cities D) All of the above are natural monopolies.
If both money demand and commodity demand are unstable, as many activists believe, which type of policy target would most likely lead to a stable economy? (assume no supply-side shocks, and a fixed price level)
A) money supply target B) real GDP target C) interest rate target D) none of the above
A risk-averse individual has
A) an increasing marginal utility of income. B) an increasing marginal utility of risk. C) a diminishing marginal utility of income. D) a diminishing marginal utility of risk. E) a constant marginal utility of income, but a diminishing marginal utility of risk.
If the Fed decreases the money supply, the interest rate
a. decreases and aggregate spending increases. b. decreases and aggregate spending decreases. c. increases and aggregate spending decreases. d. increases and aggregate spending increases. e. increases and money demand decreases.