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; higher; potential
B. recessionary; lower; potential
C. recessionary; lower; lower
D. expansionary; lower; potential
Answer: B
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Explain how the free-market mechanism adjusts prices so that resource allocation is economically efficient
In the long run, total fixed cost:
a. rises. b. falls. c. does not exist. d. is constant.
Refer to Figure 4-7. The figure above represents the market for iced tea. Assume that this is a competitive market. If 20,000 units of iced tea are sold
A) the marginal benefit of each of the 20,000 units of iced tea equals $3. B) producer surplus equals consumer surplus. C) marginal benefit is equal to marginal cost. D) the deadweight loss is equal to economic surplus.
In the Hotelling model of spatial competition, profits arise from:
a. monopoly power. b. rents based on locational advantage. c. the ability to price discriminate. d. increasing returns to scale.