If a positive permanent supply shock were to occur, the resulting equilibrium would be a:
A. higher level of output at lower prices.
B. lower level of output and prices.
C. higher level of output and prices.
D. lower level of output at higher prices.
Answer: A
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When the Federal Reserve decreases the money supply, at the previous equilibrium interest rate households and firms will now want to
A) sell Treasury bills. B) hold less money. C) neither buy nor sell Treasury bills. D) buy Treasury bills.
The above figure shows the payoff to two gasoline stations, A and B, deciding to operate in an isolated town. If firm A chooses its strategy first, then
A) firm A will not enter. B) firm B's entry is blockaded. C) both firms will enter. D) firm A will enter and firm B will not.
If a good is a normal good, an increase in income will
A) decrease the quantity demanded of the good. B) increase the demand for the good. C) cause the demand curve for the good to shift to the left. D) cause a movement down along the demand curve.
Suppose an industry has 100 firms, each with supply curve P = 50 + 10Q. Furthermore, suppose the market demand curve is given by P = 200 - 0.9Q. What is the industry supply curve?
A. P = 50 + 0.1Q B. P = -500 + 10P C. P = 50 + 10 Q D. P = 500 + Q