Figure 8.4 depicts demand and costs for a monopolistically competitive firm. If the firm's demand curve shifts to the left as more firms enter the market:
A. the firm's average cost will be higher at the new profit-maximizing output level.
B. the firm's average cost will be lower at the new profit-maximizing output level.
C. the firm's average cost will remain the same at the new profit-maximizing output level.
D. There is not sufficient information.
Answer: A
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An increase in aggregate demand is most likely to cause an increase in the price level when the economy is
A. operating near full employment. B. on the horizontal part of the aggregate supply curve. C. operating with high unemployment. D. operating with substantial excess capacity.
The consumer price index is the
A) cost of a market basket of goods and services typically consumed in the base year. B) cost of a market basket of goods and services typically consumed in the current period. C) average of the prices of the goods and services purchased by a typical urban family of four. D) average of the prices of new final goods and services produced in the economy over a period of time.
If productivity increases as wages increase and firms pay a wage above the market clearing wage, then
A. these firms will go out of business in the long run because they will not be able to compete with firms paying lower wages. B. these firms will have lower profit levels than their competitors. C. these firms will face an excess demand for labor and will be able to hire the best workers in the market. D. a potential benefit these firms may receive is a reduction in employee turnover.