Assume the peanut industry, a perfectly competitive industry, is in long-run equilibrium with a market price of $5. If demand for peanuts increases and this industry is a decreasing-cost industry, long-run equilibrium will be reestablished at a price
A. equal to $5.
B. less than $5.
C. greater than $5.
D. either greater than or less than $5, depending on the number of firms that enter the industry.
Answer: B
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Assume price exceeds average variable cost over the relevant range of demand. If a monopolistically competitive firm is producing at an output where marginal revenue is $23 and marginal cost is $19, then to maximize profits the firm should
A) continue to produce the same quantity. B) decrease output. C) shut down. D) increase output.
The money value of all trading activity (Q) at market prices (P) is called Gross Domestic Product for a given year
Indicate whether the statement is true or false
Assuming a decrease in money demand, then to keep interest rates constant the Fed must
a. keep the money supply constant. b. conduct an open market sale of bonds. c. accommodate the decreased demand for money by the public by increasing the money supply. d. All of the above e. None of the above
One reason that it might be difficult for a player to determine his best strategy is that
A) he might have limited ability to calculate the possible outcomes. B) he is irrational. C) there is no pure strategy. D) there are multiple Nash equilibria.