Firms in a perfectly competitive industry are producing goods efficiently in the long run if each is producing at the minimum point of the
A) AVC curve.
B) MC curve.
C) LAC curve.
D) AFC curve.
Answer: C
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A subsidy
a. used in an abatement equipment market can achieve an efficient solution if the subsidy is set equal to the MEB at QE b. on pollution reduction activity encourages firms to reduce pollution below a predetermined standard c. on abatement equipment can create bias by changing the relative prices of various abatement technologies d. all of the above e. (a) and (b) only
A repurchase agreement of government securities by the Fed
A) permanently increases bank reserves. B) temporarily increases bank reserves. C) permanently reduces bank reserves. D) temporarily reduces bank reserves.
Long-term contracts become longer:
A. when spot markets work well. B. when the exchange environment is more complex. C. when marginal costs are declining. D. when specialized investment becomes more important.
Why is expansionary monetary policy ineffective in the liquidity trap?
What will be an ideal response?