Toothpicks are sold in a perfectly competitive market. The market price is currently $3 per box of one hundred toothpicks
At its current level of production, a representative firm in the toothpick industry is producing at a level of output such that long-run average cost is $3.25 per box of one hundred toothpicks. Given this information, is the toothpick industry in equilibrium? Explain.
No, the industry is not in equilibrium. In long-run equilibrium, price is equal to short-run marginal cost, short-run average cost, and long-run average cost. Firms in this industry are incurring losses and some will leave the industry. This will increase the price of toothpicks until firms are no longer incurring losses. In the long-run profits are driven to zero.
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According to adaptive expectations theory, expansionary monetary and fiscal policies to reduce the unemployment rate are
A) useless in the short run
B) useless in the long run
C) ineffective on the price level
D) none of the above
A monopsonist faces a constant elasticity of labor supply of 1.5. If the monopsonist pays $15 per hour, its marginal expenditure equals
A) $15. B) $25. C) $7. D) 25%.
The arrival of Michael Jordan, Larry Bird, and Magic Johnson in the 1980s increased the popularity of pro basketball. This led to
a. an increase in the equilibrium quantity of professional basketball b. a decrease in the equilibrium quantity of professional basketball c. a decrease in the price of professional basketball tickets d. a decrease in pro basketball players' salaries e. an increase in the price of professional basketball tickets but no change in game attendance
Other things the same, which of the following responses would we expect to result from a decrease in U.S. interest rates?
a. U.S. citizens decide to hold more foreign bonds. b. People choose to hold more currency. c. You decide to purchase a new oven for your cookie factory. d. All of the above are correct.