Give two reasons why the long-run industry supply curve may slope upward. Use an example to demonstrate your reasons
1) Some resource used in production may be available only in limited quantities. 2) Firms may have different cost structures. The example provided in the text for the first reason is the market for farm products. As more people become farmers, the price of land is bid up since its supply is limited. As the price of farm land is bid up, the costs to all farmers in the market rise. The example used to support the second reason is the market for painters. Anyone can enter the market for painting services, but not everyone has the same costs because some painters work faster than others.
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According to real business cycle theorists, the tendency of money to lead output may be due to
A) government spending shocks, which lead to later changes in economic activity, and the tendency for bank loans to expand in advance of real activity that will occur at a later date. B) the tendency for bank loans to expand in advance of real activity that will occur at a later date and the Federal Reserve's use of all available information in trying to stabilize the price level. C) the Federal Reserve's use of all available information in trying to stabilize the price level and the Federal Reserve's use of all available information in trying to stabilize the level of economic activity. D) the Federal Reserve's use of all available information in trying to stabilize the level of economic activity and government spending shocks, which lead to later changes in economic activity.
Models should:
A. attempt to include every detail of the situation being studied. B. attempt to describe a situation with perfect accuracy. C. not be applied to microeconomics. D. describe a real life situation accurately.
When total production is greater than total expenditures, __________ is produced than households want to buy, which leads to __________ in inventory, which signals firms that they have __________, which causes firms to cut back production
A) less; decreases; underproduced B) less; increases; overproduced C) more; decreases; underproduced D) more; increases; overproduced
To help pull an economy out of a recession and put additional income in the hands of the public, a government can force its expenditures to ________ its revenues and create a ________
A) reduce; deficit B) exceed; special taxes C) stimulate; depression D) exceed; deficit