If perfectly competitive firms have to account for external costs of production, then at the equilibrium level of output
A. P < MSC
B. P = MC
C. MC = MSC
D. Both A and C are correct.
Answer: D
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The fundamental identity of national income accounting is
A) total production = total income - total expenditure. B) total production = total income + total expenditure. C) total production = total income = total expenditure. D) total production = total income/total expenditure.
Refer to the graph shown of average costs for a typical firm. The per-unit cost of the industry would be $8 if:
A. one firm produced 500 units of output. B. two firms produced 1,000 units of output each. C. one firm produced 667 units of output. D. two firms produced 250 units of output each.
Which of the following statements is true?
A) The supply of oil is perfectly inelastic; therefore, as the demand for oil increases over time the price of oil increases significantly. B) The supply of oil is very inelastic over short time periods but becomes more elastic over time. A given shift in supply results in a smaller increase in the price of oil when the supply is more elastic. C) Over short periods of time increases in the demand for oil are greater than increases in the supply of oil. Over the long run increases in the demand and the supply of oil are about equal. As a result, the price of oil increases greatly in the short run but is stable in the long run. D) The supply of oil is very elastic over short time periods but becomes perfectly inelastic over time. A given shift in supply results in a greater increase in the price of oil when the supply of oil is perfectly inelastic.
If the money supply in the economy were at MS2, and the Federal Reserve Bank used open market operations to move money supply to MS1 the overall result in the economy would be:
A. Aggregate demand shifted in, causing GDP to fall.
B. Aggregate supply shifted in, causing GDP to fall.
C. Aggregate demand shifted out, causing GDP to rise
D. LRAS move to the FE level of output.