If a firm shuts down in the short run it will
A) break even. B) suffer a loss equal to its fixed costs.
C) declare bankruptcy. D) suffer a loss equal to its variable costs.
B
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Starting from long-run equilibrium, a large increase in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; higher; potential B. recessionary; higher; potential C. recessionary; lower; lower D. expansionary; higher; higher
When insurance companies offer fair insurance,
A) risk-averse agents always purchase it. B) risk-neutral agents never purchase it. C) risk-loving agents always purchase it. D) nobody would purchase fair insurance.
If the exchange rate between two countries is expected to remain fixed at its current rate, then
A) output growth rates must be equal in the two countries. B) price levels must be equal in the two countries. C) inflation rates must be equal in the two countries. D) nominal interest rates must be equal in the two countries. E) none of the above
Consider an output beyond the minimum point of a firm's short run average total cost curve. At this level of output the firm can use its ________ input at a lower average cost but only by using its ________ input at a higher average cost.
A. variable capital; fixed labor B. fixed capital; variable labor C. variable labor; fixed capital D. fixed labor; variable capital