When can we expect a factor-price effect to occur? How does a factor-price effect alter an industry's short-run and long-run supply curves?
What will be an ideal response?
A factor-price effect occurs when the industry in question represents a substantial fraction of the demand for a variable input. When the industry's output expands, the resulting increase in demand for the input causes its price to rise, which in turn increases the marginal costs of firms in the industry. In the presence of a factor-price effect, the industry's short-run supply curve will be more inelastic than the sum of individual firms' short-run supply curves would otherwise indicate. In the long run, a factor-price effect causes the industry to be an increasing-cost industry, even if the firms are identical. In this case, the industry's long-run supply curve will be upward sloping.
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Explain the difference between induced consumption expenditure and autonomous consumption expenditure. Why isn't all consumption expenditure induced expenditure?
What will be an ideal response?
Early attempts to establish paper money were hampered by:
a. counterfeiting. b. constitutional prohibition against states issuing paper money. c. currency valuations that varied from city to city. d. All of the above are correct. e. Only a and c are correct.
If input prices for a perfectly competitive firm increase as the output of the industry expand in the long run, the long-run industry supply curve will:
a. have a positive slope. b. have a negative slope. c. be perfectly horizontal. d. be perfectly vertical.
Short-term interest rates show the cost of borrowing money for how long?
(A) Between 10 and 30 years. (B) For no more than a month. (C) For a few days or months. (D) Between a few months and two years.