Refer to the accompanying figure.
Based on the figure, if autonomous spending increases from 400 to 600, then the new short-run equilibrium output will equal:
A. 600.
B. 800.
C. 1,200.
D. 400.
Answer: C
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The self-correcting property of the economy means that output gaps are eventually eliminated by:
A. increasing or decreasing potential output. B. government policy. C. decreasing inflation only. D. increasing or decreasing inflation.
Each member of a cartel
A) agrees to reduce output lower than it would if it were acting independently. B) is operating illegally in every country in which it is doing business. C) sets output independently of the impact on other members. D) makes less money than it otherwise would.
If the cross elasticity between two goods, X and Y, is positive, then we know they are
a. substitute goods b. complementary goods c. unrelated goods d. inferior goods e. normal goods
Which of the following would erode the monopoly pricing power of a firm that was controlling a market?
A. The development of substitutes for the product by other firms. B. New technology developed by the firm that lowered long run average costs. C. A tax on corporate profits. D. All of these would reduce the monopoly power of the firm.