A firm decreases its scale of operation and discovers that its long-run average costs decrease. Which of the following does this indicate?
A) Labor's marginal product has increased.
B) Diseconomies of scale were absent in the larger plant.
C) The firm's scale initially was so large that it experienced diseconomies of scale.
D) The firm's scale initially was too small to experience economies of scale.
E) Its long-run marginal cost was smaller with the larger plant than with the smaller plant.
C
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Which of the following explains why the aggregate demand curve is downward sloping?
A) the open economy effect B) the real-balance effect C) the interest rate effect D) all of the above
When economic profits are zero for a firm in a perfectly competitive market, it means that:
A. average total costs are zero. B. price is equal to minimum average total cost. C. average variable costs are minimized. D. MR is equal to AVC.
The short-run aggregate supply curve is most likely to shift down (to the right) when actual output is:
A. not equal to potential output, regardless of whether it is above or below. B. less than potential output. C. equal to potential output. D. greater than potential output.
Stagflation refers to a situation in which the economy is experiencing:
A. high economic growth and high inflation. B. low economic growth and high inflation. C. high economic growth and low inflation. D. low economic growth and low inflation.