Answer the following questions true (T) or false (F)
1. The long-run aggregate supply curve is vertical.
2. When potential GDP increases, long-run aggregate supply also increases.
3. A supply shock causes the long-run aggregate supply curve to shift left, decreasing the price level.
1. TRUE
2. TRUE
3. FALSE
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If you earn income now and expect to live off savings in the future, then a raise now will cause you to save more so long as consumption -- now and in the future -- is a normal good.
Answer the following statement true (T) or false (F)
_________ can cloud the ability to make decisions or to accept decisions once they are made
a. Procrastination b. Integrity c. Self-doubt d. Boredom
Firm A producing one good acquires another firm B producing another good. Price elasticity of demand for Firm A's good is -1.8 and Firm's B is -1.8 . Holding other things constant and assuming both goods are substitutes, the acquiring firm should
a. Raise prices on both goods with a larger increase in Firm A's good b. Raise prices on both goods with a larger increase in Firm B's good c. Raise prices on both goods by the same amount d. Lower prices on both goods
Perfectly competitive firms ____ earn zero economic profit in long-run equilibrium because ____.
A. always; firms in perfectly competitive industries always maximize output and so flood the market until the equilibrium price of output is driven to zero B. sometimes; the demand curve for an individual perfectly competitive firm may or may not cross the company’s long-run average total cost curve at its lowest point C. always; firms enter whenever their economic profit is positive and exit whenever it’s negative, so in long-run equilibrium economic profit must always be zero D. never; no firm would be willing to produce if it received zero economic profit