Classical economists believed that:
A. price flexibility automatically directs market economies to full employment.
B. budget deficits and surpluses were necessary for the control of economic fluctuations.
C. market economies suffer prolonged periods of recessions and depressions.
D. market economies are inherently unstable because of fluctuating aggregate demand.
Answer: A
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The economy pictured in the figure below has a(n) ________ gap with a short-run equilibrium combination of inflation and output indicated by point ________. 
A. recessionary; B B. recessionary; C C. recessionary; A D. expansionary; A
In the above figure, curve A is the ________ curve and curve C is the ________ curve
A) total variable cost; total fixed cost B) total cost; total fixed cost C) total fixed cost; total variable cost D) total cost; total variable cost E) total variable cost; total cost
The above figure shows the payoff to two firms in an industry deciding to make an investment in worker safety. Neither firm will make the investment because
A) each can benefit from the other firm incurring the costs. B) there is no benefit to making the investment. C) each firm pays for the other firm's investment. D) society does not care about worker safety.
Anything that keeps new firms from entering an industry in which firms are earning economic profits.