There are 1,000 identical firms in a price-taker industry. In the short run, total revenues of each firm exceed total costs. What will happen in the long run?
a. Nothing, because each firm is already maximizing its profits.
b. Many firms will enter the market and each firm will eventually operate at a loss.
c. Additional firms will enter the market, and price will be driven down to where each firm will be making just enough to stay in business.
d. Additional firms will enter the market, but the price will remain the same because the existing firms will not allow price to decrease.
C
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Pencils are produced in the market economy
A) only because people need pencils. B) only because pencil production is centrally planned, from the growing of the trees and mining of the graphite to the final stages of pencil assembly. C) even though the final assemblers of pencils have no idea how to produce the paint, graphite, wood, rubber, and metal ferrules. D) by government decree.
The price paid by a tenant to rent an apartment most closely reflects the cost to the
A) landlord of constructing (or purchasing), maintaining, and operating the apartment. B) landlord of not renting to someone else. C) society of the opportunities thereby forgone. D) tenant of finding an alternative place to live.
If a new cash deposit creates excess reserves of $5,000 and the required reserve ratio is 10 percent, the banking system can increase the money supply by a maximum of
a. $50,000. b. $500. c. $5,000. d. $4,500.
The city of Hope has a labor force of 1000. Twenty people lose their jobs each month and remain unemployed for exactly one month before finding jobs. On January 1, May 1, and September 1 of each year, 50 people lose their jobs for a period of four months before finding new jobs. What is the average duration of an unemployment spell?
A. 3.43 months B. 2.85 months C. 2.15 months D. 3.14 months