In Figure 23.3, diagram "a" presents the cost curves that are relevant to a firm's production decision, and diagram "b" shows the market demand and supply curves for the market. Use both diagrams to answer the following question: If the market demand curve is D2 in Figure 23.3, then in the long run,
A. There are zero economic profits, so there will be no entry or exit.
B. There are zero economic profits, so firms will exit.
C. Economic profit is less than zero, and firms will exit.
D. Economic profit is greater than zero, and firms will expand production.
Answer: A
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Why do school districts sell bonds to the public when they are financing a new school building program rather than sell stock?
What will be an ideal response?
Which of the following shocks is most likely to cause an expansion?
a. An upward spike in oil prices. b. An increase in autonomous consumption spending. c. A significant decline in business equipment spending. d. A sudden increase in the interest rate. e. A significant decline in exports.
A favorable supply shock
a. raises unemployment and the inflation rate. b. raises unemployment and reduces the inflation rate. c. reduces unemployment and raises the inflation rate. d. reduces unemployment and the inflation rate.
Which of the following statements is true?
A. Keynesians believe that consumers are inherently unstable in consumption decisions, but that businesses are relatively stable in making investment decisions. B. Monetarists believe in discretionary monetary policy. C. Lowering tax rates is the main priority of supply side economists. D. Supply-side economists believe in a heavily regulated economy.