Suppose sharply higher coffee prices lead to an increase in demand for tea. As tea prices increase, tea producers experience short-run economic profits. If the tea industry is a price-taker industry and if sufficient time is allowed for the market to adjust fully to the increase in demand for tea, one would expect the tea industry's output to
a. increase, and economic profits to increase as well.
b. increase, and economic profits to disappear.
c. decline, and economic profits to increase.
d. decline, and economic profits to disappear.
B
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A hurricane destroyed the peach crop in South Carolina. Shortly thereafter the price of peaches rose significantly. These events suggest that a(n):
a. decrease in the supply of peaches caused the price of peaches to rise. b. increase in the supply of peaches caused the price of peaches to rise. c. increase in demand caused the price of peaches to rise. d. decrease in demand caused the price of peaches to rise.
Gross private domestic investment does not include:
a. spending for new houses. b. spending to build up inventories. c. unintentional inventory investment. d. spending on employee salaries. e. spending for office supplies.
In a perfectly competitive market, firms are not restricted from entering or leaving an industry in response to profits or losses
Indicate whether the statement is true or false
Assume that a product upgrade strategy adopted by a microwave oven manufacturer increases his marginal cost by $1.50 . If the strategy also increases the demand for the product by $3.50 per unit, total economic value will increase
Indicate whether the statement is true or false