When a monopolistically competitive industry is in long-run equilibrium:
A. price equals minimum average total cost.
B. firms earn zero economic profits.
C. firms earn economic profits.
D. price equals marginal cost.
Answer: B
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The demand for cars in a certain country is given by: D = 20,000 - P, where P is the price of a car. Supply by domestic car producers is: S = 5,000 + 0.5P.If this economy is open to trade, and the world price of a car is $6,000, the domestic quantity demanded will be ________ and quantity supplied will be ________.
A. 14,000; 8,000 B. 12,000; 10,000 C. 12,000; 8,000 D. 8,000; 14,000
Starting from long-run equilibrium, a decrease in autonomous investment results in ________ output in the short run and ________ output in the long run.
A. lower; potential B. higher; higher C. higher; potential D. lower; higher
A firm that can afford to buy capital out of retained earnings without borrowing
a) is indifferent to interest rates b) invests more as interest rates rise c) invests less as interest rates rise d) is indifferent to the marginal product of capital e) has an increasing marginal product of capital
Politics enters into the determination of economic policy in a positive way because:
A. political decisions do not always reflect the will of society. B. it does not take market failures or failures of market outcome into account when formulating policy. C. political decisions always reflect the will of society. D. it takes market failures and failures of market outcome into account in formulating policy.