Suppose a sushi restaurant is making significant economic profit in the short run. In the long run
A. high barriers to entry keep people from opening sushi restaurants.
B. the government will require the sushi restaurant to sell part of its interests in the city.
C. more people will open steak restaurants, increasing the economic profit for the sushi restaurant.
D. more people will open sushi restaurants, reducing the economic profit for each restaurant.
Answer: D
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A sale of bonds by the Fed generates
A) an increase in the demand for money balances. B) a decrease in the demand for money balances. C) an increase in the demand for bonds and a rise in bond prices. D) an increase in the supply of bonds and a fall in bond prices.
Suppose that Venezuela experiences significant capital outflows after a recent election. If the nation had flexible exchange rates, these flows would have had the following effect on the reserves account and monetary base
a. Reserves account would rise and monetary base would fall. b. Reserves account would not change and monetary base would not change. c. Reserves account would fall and monetary base would not change. d. Reserves account would fall and monetary base would fall. e. Reserves account would fall and monetary base would rise.
An increase in our federal government's budget deficit will likely:
a. increase the national debt. b. increase interest rates. c. be less effective in stimulating the economy than the spending multiplier implies because of crowding out. d. decrease borrowing by households and businesses. e. All of the answers are correct.
People can reduce the inflation tax by
a. reducing savings. b. increasing deductions on their income tax. c. reducing cash holdings. d. None of the above is correct.