Which of the following is TRUE for the perfectly competitive firm?
A) Price and MR are always equal.
B) AR is less than price.
C) AR is more than price.
D) Price elasticity of demand is equal to 1.
Answer: A
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If the economy experiences a strong boom and consumers' incomes sharply rise, local stores with higher prices are ________ to have a(n) ________ in the number of customers.
A) likely; increase B) likely; decrease C) not likely; increase D) not likely; change
If a market economy has a self-correcting mechanism, when output is lower than potential or full-employment output,
a. changes will occur that will automatically guide the economy back to full employment. b. resource prices will increase. c. prolonged unemployment such as was experienced during the Great Depression will occur. d. the economy will fall into a more severe recession.
One reason why present dollars are worth more than future dollars is because income-earning investment opportunities exist.
Answer the following statement true (T) or false (F)
Suppose that a monopolistically competitive market is in its long-run equilibrium. If the market demand curve shifts to the left due to a recession:
A. the number of firms in the market decreases in the short run. B. some firms may earn negative profits in the short run. C. firms' average costs of production decreases as they decrease output levels in the short run. D. None of these