Refer to the graph shown. Assuming that the industry operates under conditions of perfect competition and that the cost curves do not shift, the price of construction in a long-run competitive equilibrium will be:
A. $55 per square foot.
B. $60 per square foot.
C. $50 per square foot.
D. In the long run no construction will be supplied at any price.
Answer: C
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The idea that less government regulation will lower the cost of production, increase profit, and raise the level of production so that, in the end, real GDP will increase is held by the
a. classical school b. Keynesian school c. rational expectations school d. school of supply-side economics e. neo-Keynesian school
Suppose that there are two types of houses for sale: those with solid foundations and those with cracked foundations. In all other respects, the two types of houses are identical. Houses with solid foundations are worth $200,000, while those with cracked foundations are worth $200,000 minus the $20,000 to fix the crack, or $180,000. Sellers know which type of house they have, but buyers cannot detect whether the foundation has a crack. Suppose that 80 percent of the houses for sale have a solid foundation and 20 percent of the houses for sale have a cracked foundation. How could the owner of a house with a solid foundation credibly signal to potential buyers that the house has a solid foundation?
A. Lower the asking price to $196,000. B. Keep the house on the market for $200,000 because eventually buyers will catch on. C. Simply tell potential buyers that the foundation is solid. D. Offer a warranty to fix any foundation problems that develop in the next 12 months.
If the demand for steak increases as income increases, then steak is a(n):
A. normal good. B. inferior good. C. substitute good. D. complementary good.
The lowest possible unemployment rate that will not cause the inflation rate to increase is called:
A. the nonaccelerating inflation rate of unemployment (NAIRU). B. the natural rate of unemployment. C. "full employment." D. All of these statements are true.