In a competitive market with free entry and exit, if all firms have the same cost structure, then
a. all firms will operate at their efficient scale in the short run.
b. all firms will operate at their efficient scale in the long run.
c. the price of the product will differ across firms.
d. Both a and b are correct.
b
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You took out a loan one year ago at a nominal interest rate of 7.5%. The CPI stood at 173.2 at the time and you expected it to rise to 178.6 over the year. Today the CPI is actually 179.5
Calculate the expected real interest rate on the loan and the real interest rate on the loan.
The addition to total physical product when one more unit of capital (or loanable funds) is used in production is called
a. marginal physical product of capital b. marginal revenue product of capital c. marginal use of loanable funds d. interest e. depreciation
If substantial income mobility is present,
a. there is considerable movement of individuals up and down the income ladder when income comparisons among the same individuals or households are made at different points in time. b. annual income data are an accurate indicator of the long-term economic status of individuals and families. c. the rich tend to stay rich and the poor tend to stay poor. d. individuals and families move quite often among the geographic regions of a country but not among income groups.
The underground economy—the informal sector—can be a significant drag on the economies of developing countries. Why are firms in the informal sector often less efficient than firms in the formal sector?
What will be an ideal response?