A perfectly elastic demand:
A. is demonstrated by a vertical demand curve.
B. has a price elasticity of -1.
C. means consumers are extremely sensitive to a change in price.
D. means quantity demanded is unchanged if the price changes by any amount.
Answer: C
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Suppose that there is a positive aggregate demand shock and the central bank commits to an inflation rate target. But if the commitment is not credible, then
A) the public's expected inflation will remain unchanged. B) the short-run aggregate supply curve will rise. C) over time inflation will fall back down to the inflation target. D) all of the above. E) both A and B.
If the economy is not operating at full-employment real GDP, classical economists prescribe a government policy of nonintervention
a. True b. False Indicate whether the statement is true or false
Monopolistically competitive firms can earning positive economic profits in the short run, but in the long run:
a. the level of profits will be unchanged. b. they will make zero economic profits. c. firms will be unable to enter the industry because of the existence of barriers to entry. d. a limited number of firms will enter the industry, and profits will be reduced but will remain positive.
In providing a legal framework, the government
A. Protects patents to encourage entrepreneurship. B. Protects the ownership of private property to encourage the private sector. C. Protects copyrights to encourage textbook protection. D. All of the choices are correct.