Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's:
A. price, output, and average total cost would all be higher.
B. price and average total cost would be higher, but output would be lower.
C. price, output, and average total cost would all be lower.
D. price and output would be lower, but average total cost would be higher.
Answe: B. price and average total cost would be higher, but output would be lower.
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In Figure 11.3, the multiplier effect resulting from a change in investment spending is represented as the distance between points
A) a0 and a1. B) y0 and y1. C) a1 and y1. D) C0 and C1.
The production function shows that as employment increases, real GDP
A) increases until it reaches potential GDP and then it starts to decrease. B) increases at a decreasing rate. C) decreases at a decreasing rate. D) increases at an increasing rate. E) increases at a constant rate.
Both Jones and Smith agree that the economy is in a recessionary gap. Jones proposes a tax cut and believes that it will raise Real GDP and lower the price level. Smith agrees that a tax cut will raise Real GDP, but he argues that it will not lower the price level in the short run. It follows that
A) both Jones and Smith believe that lower taxes will shift the AD curve rightward, but will not shift the SRAS curve. B) both Jones and Smith believe that lower taxes will shift the SRAS curve rightward, but will not shift the AD curve. C) Jones believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift. Smith believes that the AD curve will shift rightward and the SRAS curve will not shift. D) Smith believes that the tax cut will shift the SRAS curve rightward and the AD curve will not shift. Jones believes that the AD curve will shift rightward and the SRAS curve will not shift.
Fred purchases a bond, newly issued by the Big Time Corporation, for $10,000. The bond pays $400 to its holder at the end of the first, second, and third years and pays $10,400 upon its maturity at the end of four years. The principal amount of this bond is ________, the coupon rate is ________, and the term of this bond is ________.
A. $10,000; 4 percent; four years B. $10,000; $400; 4 percent C. $400; 40 percent; four years D. $10,400; 4 percent; four years