If the actual price level exceeds the expected price level reflected in long-term contracts,
a. many firms will find production more profitable than they had expected and will increase the quantity of output supplied.
b. many firms will find production less profitable than they had expected and will decrease the quantity of output supplied.
c. many firms will find production more profitable than they had expected and will decrease the quantity of output supplied.
d. many firms will find production less profitable than they had expected and will increase the quantity of output supplied.
A
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The following graph applies to a consumer for whom good x is an inferior good. The price of x falls from p to p', and one of the curves below represents the consumer's (uncompensated) demand curve while the other represents the consumer's compensated demand (or MWTP) curve.
a. Which curve is which? (Explain.)
b. What is it about these curves that makes them intersect at the original price p?
c. Once the consumer has optimized at the new price p', illustrate the new (uncompensated) demand and the new MWTP curve. d. For curves that have shifted, explain why; for curves that have not shifted, explain why as well. What will be an ideal response?
The way in which an oligopolist acts in response to a price change by a competitor is known as a
A) zero-sum game. B) positive-sum game. C) reaction function. D) cooperative game.
The rational-ignorance effect is a result of
What will be an ideal response?
During recessions, changes in investment spending are the biggest contributor to changes in
a) retail sales. b) consumer spending. c) real GDP. d) personal income.