A perfectly competitive firm in a constant-cost industry produces 1,000 units of a good at a total cost of $50,000. The prevailing market price is $48. Assuming that this firm continues to produce in the long run, what happens to output level in the long
run?
A) The firm's output falls.
B) The firm's output increases.
C) The firm produces the same output level.
D) There is insufficient information to answer the question.
Answer: B
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An above full-employment equilibrium is
A) a theoretical possibility but cannot happen in reality. B) the equilibrium in which the economy is in most of the time. C) when real GDP exceeds potential GDP. D) the period of time when prices are falling.
The increase in unemployment associated with a recession is called
If a nonbinding price ceiling is imposed on a market, then the
A. price in the market will decrease. B. price in the market will increase C. quantity sold in the market will stay the same. D. quantity sold in the market will decrease.
The fact that output gaps will not last indefinitely, but will be closed by rising or falling inflation is the economy's:
A. income-expenditure multiplier. B. self-correcting property. C. short-run equilibrium property. D. long-run equilibrium property.