The long-run aggregate supply curve is:
A. downward sloping.
B. upward sloping.
C. a vertical line at potential output.
D. a horizontal line at the current price level.
Answer: C
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Differentiate between double oral auctions and bilateral negotiations
What will be an ideal response?
The discovery and dissemination of a new cost-saving technology
a. is an example of a positive demand shock b. would cause the long-run AS curve to shift leftward, thereby increasing both output and the price level c. would increase firms' unit costs d. would lead to an increase in output and a decrease in the price level e. is an example of a negative supply shock
Assume the supply curve for diapers is a typical, upward-sloping straight line, and the demand curve for diapers is a typical, downward-sloping straight line. Suppose the equilibrium quantity in the market for diapers is 1,000 per month when there is no tax. Then a tax of $0.50 per diaper is imposed. The effective price paid by buyers increases from $1.50 to $1.90 and the effective price received
by sellers falls from $1.50 to $1.40 . The government's tax revenue amounts to $475 per month. Which of the following statements is correct? a. After the tax is imposed, the equilibrium quantity of diapers is 900 per month. b. The demand for diapers is more elastic than the supply of diapers. c. The deadweight loss of the tax is $12.50. d. The tax causes a decrease in consumer surplus of $380.
Suppose you have just opened a store to sell espresso machines. Both you and a competing store buy this machine from a manufacturer for $130 each. Your competitor, who has a store of the same size as yours, is currently selling about 10 machines a month
at a price of $200 per machine. You expect to sell about 6 machines a month at a price of $220 per machine. If you lower your price, you expect to make a loss. Which of the following could explain why your competitor is able to profitably sell the machine at a lower price although the cost of purchasing the machine is the same for the both of you? A) The competing store probably has a greater number of employees. B) The competing store probably has a lower average variable cost of production. C) The competing store's goal is to maximize revenue and not profit. D) The competing store probably has a lower average cost because average fixed cost falls as output increases.