In a perfectly competitive market, what would you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product rises?
What will be an ideal response?
In the short run, firms will earn positive economic profit as price rises. In the long run, some firms will enter the industry, increasing market supply, and reducing the market price until all firms are earning zero economic profit.
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Three candidates for political office disagree over the benefits of enlarging the federal budget deficit
Candidate C says the stimulation package is needed to increase employment and real GDP; Candidate D says it will only cause higher prices; and Candidate F says it will have no effect on either real GDP or the price level. How do the three candidates differ with respect to the condition of the economy and the effects of fiscal policy? A) Candidate C thinks the simple Keynesian model is applicable, while D thinks the expansionary policy will fully crowd out private investment. F believes the economy is experiencing a recessionary ga
When you purchase a share of stock, you are
A. borrowing funds from the corporation. B. lending funds to the corporation. C. selling an ownership right in the corporation. D. acquiring an ownership right in the corporation. E. b and d
The profitability of an investment project will decrease if
a. tax rates decrease. b. real interest rates increase. c. real interest rates decrease. d. business tax deductions increase.
The aggregate supply curve is drawn with
A. the price level on the vertical axis and nominal GDP on the horizontal. B. nominal GDP on the vertical axis and real GDP on the horizontal. C. the price level on the vertical axis and real GDP on the horizontal. D. real GDP on the horizontal axis and the rate of inflation on the vertical.