A firm will only earn normal profit in the long run
a. if firms can freely enter or leave the market
b. if firms do not try to maximize profit
c. only if the industry is perfectly competitive
d. whenever products are not differentiated
e. if barriers to entry exist
A
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Refer to Figure 26-11. In the dynamic model of AD-AS in the figure above, if the economy is at point A in year 1 and is expected to go to point B in year 2, and the Federal Reserve pursues no policy, then at point B
A) the unemployment rate is very, very low. B) incomes and profits are rising. C) firms are operating above their normal capacity. D) the economy is below full employment. E) there is pressure on wages and prices to rise.
The above figure shows supply and demand curves for milk. If the government passes a law that establishes $3 per month as the legal minimum per gallon price, consumer surplus will be
A) a. B) a + b + f. C) a + b + c. D) c + d + g.
Which of the following statements about demand is correct?
a. A change in the price of bicycles will not lead to a shift of the demand curve for bicycles. b. A change in the price of automobiles will lead to a shift of the demand curve for motorcycles. c. A change in demand is equivalent to a movement along a given demand curve. d. When price falls, so does the quantity demanded. e. When the demand curve shifts to the right, so will the supply curve.
A liquid trap can be avoided if the central bank:
A. charges banks fees for keeping reserves. B. pays interest on bank deposits at banks. C. pays interest on reserves. D. charges banks fees for making loans.