Competitive pricing is efficient because
A) the price that consumers pay reflects the opportunity cost to society of producing the good.
B) firms make positive economic profits in long-run equilibrium.
C) average revenue equals average cost.
D) firms produce above the minimum efficient scale.
Answer: A
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Figure 10-4
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Figure 10-4 shows the industry’s supply and demand curves in panel (1) and the cost curves of a firm in the industry in panel (2). At S1, the firm is
A. preparing to shut down. B. incurring losses. C. earning zero economic profits. D. earning economic profit greater than zero.
Which of the following would be classified as a personal consumption expenditure?
a. All of the following. b. Your purchase of a newly constructed house c. Your purchase of a preowned house. d. Your purchase of one share of Microsoft stock. e. Your purchase of this economics course.
Which of the following is true of Regression Specification Error Test (RESET)?
A. It tests if the functional form of a regression model is misspecified. B. It detects the presence of dummy variables in a regression model. C. It helps in the detection of heteroskedasticity when the functional form of the model is correctly specified. D. It helps in the detection of multicollinearity among the independent variables in a regression model.
In the Keynesian-cross model, a decrease in the interest rate ______ planned investment spending and ______ the equilibrium level of income.
Fill in the blank(s) with the appropriate word(s).