When the conditions in a competitive price-taker market are such that the firms are consistently unable to cover their production costs,
a. the firms will suffer short-run economic losses that will be exactly offset by long-run economic profits.
b. all firms will go out of business since consumers will not pay prices that enable firms to cover their production costs.
c. some firms will exit from the industry, and market price will rise until the remaining firms can earn the normal rate of return.
d. resource prices will increase, competition will decline, and eventually the firms in the industry will earn monopoly profit.
C
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The accelerator theory states that
A) the larger this period's desired capital stock the smaller will be this period's net investment. B) the larger the previous period's desired capital stock the larger will be this period's net investment. C) the larger the previous period's desired capital stock the smaller will be this period's net investment. D) this period's net investment is unrelated to this period's desired capital stock.
Noise pollution is a serious problem. One major contributor is the recent development of very powerful amplification equipment for automobile radios. Many people complain that the windows in their home vibrate when some cars drive by. Others complain that loud car radios set off very sensitive alarms in nearby parked cars. What do we know about the drivers of cars with loud stereos?
a. b, c, and e. b. It would be very expensive for them to engage in this behavior if individuals had a right to a nonvibrating home. c. The cost of their own hearing loss is less than the benefit they receive from cranking it up. d. They realize that there are no ordinances prohibiting loud noise. e. Their private costs fall short of the social costs.
Your best friend advocates the forced break-up of large firms, such as General Motors and Ford, on the grounds that they have a lot of monopoly power which they use to charge inefficiently high prices. According to Schumpeter, would breaking apart these gigantic firms guarantee consumers lower prices? Explain
Even economists who advocate small government agree that
a. national defense is a public good and that the government should provide it. b. national defense is a common resource and that the government should provide it. c. national defense is a public good, but many of them believe that it should be provided by private firms rather than by the government. d. national defense is a common resource, but many of them believe that it should be provided by private firms rather than by the government.