A perfectly competitive firm faces a:
A. perfectly elastic demand function.
B. demand function with unitary elasticity.
C. perfectly inelastic demand function.
D. None of the answers is correct.
Answer: A
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Assume that the full-employment level of output is $1,000 and the price level associated with full-employment output is 100. Also assume that the economy's current level of output is $1,100 and, at the price level of 100, current aggregate demand is $1,200. If the government moves the economy back to the full-employment level of output by reducing government purchases by $50, then the expenditures multiplier equals
A. 4. B. 5. C. 2. D. 10.
The demand for a product produced in a perfectly competitive market permanently increases. In the short run, the price
A) rises and each firm produces less output. B) rises and each firm produces more output. C) does not change as new firms enter the industry. D) does not change because each firm produces more output.
When a government turns a deficit into a surplus we would expect
A) interest rates to rise. B) interest rates to decrease. C) the demand curve for loanable funds to shift rightward. D) that more investment is crowded out.
Under perfect competition, firms are relatively ignorant of the actions of their competitors
a. True b. False Indicate whether the statement is true or false