In the long run,
A. both monopolists and perfectly competitive firms produce at minimum long-run average total cost.
B. a monopolist will exit the industry if he or she is earning zero economic profit.
C. a monopolist will always charge a higher price than he or she charges in the short run.
D. consumer surplus is smaller if an industry is a monopoly than if it is perfectly competitive.
Answer: D
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Suppose that the DeBeers company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of wholesale diamonds $10,000 per carat?
a. because the government would not allow such a high price b. because stockholders would not allow such a high price c. because the company would sell so few diamonds that it would earn higher profits by selling at a lower price d. All of the above are correct.
The quantity theory of money concludes that if real output is constant:
A. changes in velocity are proportional to changes in nominal income. B. changes in the price level are caused by changes in the money supply. C. real GDP and the money supply are related in the long run. D. changes in velocity are proportional to changes in the money supply.
Which of the following statements is FALSE?
A) The rationing function of prices is not allowed to freely operate when the government imposes price controls. B) Price controls may take the form of price ceilings or price floors. C) Price ceilings below the equilibrium price can cause black markets to develop. D) Rent controls are examples of price floors.
If workers and firms have rational expectations, they understand that ________ monetary policy will raise the inflation rate, so actual inflation ________ expected inflation
A) contractionary; will be equal to B) contractionary; will be less than C) expansionary; will be greater than D) expansionary; will be equal to E) expansionary; will be less than