Figure 10-10
Given the aggregate demand and aggregate supply conditions depicted in , which of the following will tend to occur?
a.
an increase in resource prices, which will shift SRAS to the left
b.
a decrease in resource prices, which will shift SRAS to the left
c.
an increase in the real rate of interest, which will shift aggregate demand to the left
d.
a decrease in the real rate of interest, which will shift aggregate demand to the left
e.
Both b and c are correct.
e
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What is likely to happen in a used-car market if the buyers feel that the best they can do is to buy a lemon?
A) The sellers of gems reap high profits. B) Higher gains from trade are realized. C) The entire market shuts down. D) The sellers of lemons earn high profits.
An advantage of a partnership over a corporation is that
A) a partnership's profits are taxed only once, while retained profits of a corporation are taxed twice. B) a partnership's owners usually have limited liability, while the entire wealth of owners of a corporation is at risk. C) a partnership has a perpetual life, while a corporation dies with its owners. D) a partnership's cost of capital is low relative to that of a corporation.
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.
When the price of a good rises, the resulting change in relative price causes the consumer to reduce his quantity demanded of that good, even when the consumer is income-compensated so that he remains indifferent about the price change. This observation is known as the
a. Giffen good phenomenon. b. law of demand. c. substitution effect. d. income effect.