Starting from long-run equilibrium, a large tax increase will result in a(n) ________ gap in the short-run and ________ inflation and ________ output in the long-run.
A. recessionary; lower; potential
B. expansionary; lower; potential
C. expansionary; higher; potential
D. recessionary; lower; lower
Answer: A
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Perfect flexible prices are a critical assumption in the
a. classical model. b. Keynesian model. c. monetarist model. d. new Keynesian model. e. both a and c.
Economists use the three-step method to determine whether a firm is generating economic profits, economic losses, or zero economic profits at the ______.
a. profit-maximizing level of input b. profit-maximizing level of output c. profit-minimizing level of input d. profit-minimizing level of output
Which of the following is evidence of a shortage of walnuts?
A) Firms lower the price of walnuts. B) The price of cashews is lowered in order to make up for the walnut shortage. C) The equilibrium price of walnuts falls due to a decrease in demand. D) The quantity of walnuts demanded is greater than the quantity supplied.
Refer to Scenario 7.8 below to answer the question(s) that follow. SCENARIO 7.8: A swimming pool cleaning company has the following production possibilities. With one, two, three, and four workers, the company can clean 5, 12, 17, and 20 pools per day, respectively. Refer to Scenario 7.8. The marginal product of the third worker is
A. 4. B. 5. C. 12. D. 17.