Firms in perfect competition are price takers because:
a. all small firms must take the price set by the largest firm in the market
b. firms take the price that government determines is a "fair" price
c. each firm is too small relative to the market to be able to influence price
d. free entry and exit in the short run creates a constant market price in the long run
e. high barriers to entry force firms to compete by charging lower prices than other firms in the industry
Answer: c. each firm is too small relative to the market to be able to influence price
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If the Federal Reserve unexpectedly increases the money supply, which of the following will most likely happen in the short run?
a. real GDP will rise. b. real GDP will fall. c. real interest rates will rise. d. the budget deficit will rise.
For a perfectly competitive firm, as its output increases its marginal revenue ________ and its marginal cost ________
A) changes; changes B) changes; does not change C) does not change; changes D) does not change; does not change
GoodPrice Increase Last YearAmusement park tickets5.0%Bowling balls4.2%Camouflage neckties3.1% Refer to Table 8.1, which gives hypothetical data on price changes for three goods. If the overall rate of inflation in the economy was 4.5%, which of the following statements is true?
A. The real price of all three goods decreased. B. The real price of amusement park tickets fell, and the real price of bowling balls and camouflage neckties rose. C. The real price of all three goods increased. D. The real price of amusement park tickets rose, and the real price of bowling balls and camouflage neckties fell.
Potential output is:
A. equal to actual output. B. the same as the natural rate of unemployment. C. the maximum sustainable amount of output. D. also known as the output gap.