Which of the following correctly describes the ceteris paribus assumption?
a. If we increase the price of a good, reduce consumer incomes, and lower the price of substitutes, and if quantity demanded is observed to fall, we know that the price increase caused that decline in quantity demanded.
b. If the federal government increases government spending, and the Federal Reserve Bank lowers interest rates, we know that the increase in government spending caused unemployment to fall.
c. If we decrease the price of a good and observe that there is an increase in the quantity demanded, holding all other factors that influence this relationship constant.
d. If a company reduces its labor costs, negotiates lower materials costs from its vendors, and advertises, we know that the reduced labor costs are why profits are higher.
c
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Based on the information in the above table, what is the unemployment rate? What is the labor force participation rate?
What will be an ideal response?
In long-run equilibrium, which of the following is not equal to price for a perfectly competitive firm?
a. Short-run average variable cost. b. Long-run average total cost. c. Short-run marginal cost. d. Short-run average total cost.
If the natural unemployment rate is 5.5 percent, then the economy is at long-run equilibrium when the actual unemployment rate is
A) more than 5.5 percent. B) between 0 and 5.5 percent. C) 0 percent. D) 5.5 percent. E) none of the above
Suppose that firms are located in a circle on an island. You are given transportation costs, fixed costs, variable costs, and demand (assume that customers are spread evenly along the circle). As the firm's variable costs rise,
A. the number of firms will rise in the long run. B. the number of firms will stay the same in the long run. C. the number of firms will fall in the long run. D. It is impossible to tell from the information given.