Cost-reduction generates
a. Increases in long-run profitability
b. Increases in long-run profitability only if the cost reduction is difficult to imitate
c. Decreases in long run profitability
d. No change in profitability
b
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In the case of externalities, government can use taxes and subsidies to turn an inefficient outcome into an efficient outcome.
Answer the following statement true (T) or false (F)
A firm in a perfectly competitive industry is a
A) price taker. B) quantity taker. C) quality maker. D) price maker.
Purchasing-power parity describes the forces that determine
a. prices in the short run. b. prices in the long run. c. exchange rates in the short run. d. exchange rates in the long run.
A bank allows us to diversify risk because it has a:
A. small amount of borrowers and savers, so it can connect the optimal saver to the best-matched borrower. B. big pool of borrowers and savers, so the risk of repayment is spread among many. C. big pool of borrowers, but not many savers, so it can choose the riskiest person to borrow from. D. small amount of borrowers, but many savers, so it can combine savings to make larger loans.