Suppose that the sub sandwich business is a competitive, constant-cost industry. An increase in demand for sub sandwiches, will, in the long-run lead to
a. an increase in price and industry output, but no increase in the output of existing firms.
b. no increase in price, no increase in the output of existing firms but an increase in industry output because of new firms.
c. no increase in price and an increase in industry output as each existing firm produces more.
d. no changes in price, output of existing firms or the number of firms in the industry.
b. no increase in price, no increase in the output of existing firms but an increase in industry output because of new firms.
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As an economy produces more of one of the goods on a bowed out production possibilities frontier, what happens to the opportunity cost of producing the good?
A) It remains constant. B) It decreases. C) It increases. D) It might increase, decrease, or remain constant depending on how much people value the additional units of the good. E) None of these depicts what happens to opportunity cost.
Refer to Figure 10-6. A change in income is shown in
A) Panel A. B) Panel B. C) Panel C. D) none of the above panels.
In the traditional Keynesian model, an increase in government spending
A) causes the C + I + G + X line to shift upward by the full amount of the increase in government spending. B) causes the C + I + G + X line to shift upward by an amount less than the increase in government spending. C) causes the C + I + G + X line to shift upward by more than the increase in government spending. D) causes no change in the C + I + G + X line.
Who bears the burden of an excise tax if demand is perfectly inelastic; if supply is perfectly inelastic? Use graphs in your explanation