Suppose there are 1,000 firms in a perfectly competitive market and each maximizes profit at 25 units of output when market price is $1.00 per unit. One of the points on the market supply curve must be at:
A. Price = $1 and Quantity supplied = 25,000.
B. Price = $25 and Quantity supplied = 24,000.
C. Price = $25 and Quantity supplied = 125.
D. Price = $1 and Quantity supplied = 125.
Answer: A
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Suppose Congress increased spending by $100 billion and raised taxes by $100 billion to keep the budget balanced. What will happen to real equilibrium GDP?
A) Real equilibrium GDP will fall. B) Real equilibrium GDP will rise. C) Real equilibrium GDP will initially rise, but then fall below its previous equilibrium value. D) There will be no change in real equilibrium GDP.
In most cases, higher interest rates cause the velocity of M1 to
A) turn negative. B) move erratically. C) increase. D) decline.
Which of the following would be best classified as a private good?
A) a missile defense system B) police force C) radio frequency D) clothing
The ____ takes on particular importance because it is a self-enforcing equilibrium. That is, once this equilibrium is established, neither firm has an incentive to move
a. socially optimal solution b. Nash equilibrium c. disequilibrium d. payoff matrix