Assume that one firm in a perfectly competitive market adopts a technological innovation that enables it to produce at a lower cost per unit than competing firms in the short run. Which of the following statements is correct?
a. The innovating firm will earn above-normal profit in the long run.
b. All the competing firms will be forced to exit the market in the long run.
c. This is an example of a decreasing cost industry.
d. Competing firms will need to adopt the new technology in the long run in order to survive.
e. Only new firms entering the industry with new-technology plants will be able to compete with the innovating firm.
D
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The above figure depicts the Edgeworth box for two individuals, Al and Bruce. The contract curve can be found by connecting points
A) a and b. B) a and c. C) b and d. D) c and d.
Answer the following statements true (T) or false (F)
1. The labor supply curve(s) will shift left if there is a decrease in wages. 2. An increase in the price of a product signals consumers that there is an overage and the product should perhaps be economized on. 3. The market price system provides a highly efficient mechanism for disseminating information about relative scarcities of goods, services, labor, and financial capital. 4. It is a common mistake to confuse the slope of the supply curve with its elasticity. 5. Zero elasticity in either a supply or demand curve occurs when a price change of one percent results in a quantity change of one percent.
Which one of the following is not true about poverty in the United States? a. The percentage of the population below the poverty line has decreased significantly since 1960 in the U.S., but not for every racial group
b. Blacks and Hispanics are disproportionately poorer. c. Over half of single-mother headed households are considered to be poor. d. Young families and large ones are at a high risk of living in poverty. e. It has declined steadily since 1960.
An entrepreneur with current income of $200,000 believes that her future income will either fall to $100,000 or rise to $300,000 with equal probabilities. Her rate of time preference is exactly offset by the interest rate. In the first of two periods, she spends $178,000 and saves $22,000 for the second period. Her behavior illustrates
a) a marginal propensity to consume of .89 b) the permanent income hypothesis c) precautionary saving d) the bequest motive e) a borrowing constraint