What do we need to assume about firms in the sticky price model?
A) They accommodate any demand at the given price.
B) They hire until the real wage equals the average labor productivity.
C) They maximize only current profits.
D) They adapt the price to current conditions.
A
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Starting from long-run equilibrium, a large decrease in government purchases will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. expansionary; lower; potential B. expansionary; higher; potential C. recessionary; lower; potential D. recessionary; lower; lower
Banks earn a profit by
A) charging an interest rate on their depositors' accounts. B) making loans at a higher interest rate than the rates that they offer on their deposits. C) not paying interest on their reserves. D) making loans at a lower interest rate than the rate that they offer on their deposits. E) keeping as many reserves on hand as possible.
Which of the following would require reducing government expenditures and increasing tax rates during a recession?
A. An annually balanced budget policy B. A countercyclical fiscal policy C. A cyclically balanced budget policy D. A policy employing built-in stability
Table 24.1Monopoly Costs and RevenueQuantityPriceTotal Cost1$500$4002$450$6503$400$9504$350$1,3005$300$1,700In Table 24.1, using the profit maximization rule, a monopolist that is able to practice price discrimination will charge
A. Different prices to different customers. B. A price of $500. C. A price of $450. D. A price of $400.