After government and taxes is added to the income-expenditure model, the formula for the aggregate consumption function is
A. C = a + b(Y - T).
B. C = a + b(Y + T).
C. C = a - b(T - Y).
D. C = a - b(Y - T).
Answer: A
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Suppose the market for a good is initially in equilibrium. Which of the following is most likely to happen if supply increases by a smaller amount than the increase in demand?
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In the 1870s,
a. cotton prices were declining. b. the Deep South became a food importing region. c. an increasing percentage of small farms specialized in cotton. d. black farmers devoted more of their land to cotton than white farmers. e. All of the above.
In the short run, a monopolistically competitive firm
a. must earn zero economic profit b. may earn positive or negative economic profits c. will produce output up at the point where TR = TC d. will be protected from competition by barriers to entry e. will equate price and marginal cost
Equilibrium quantity must increase when demand
a. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply increase. b. increases and supply does not change, when demand does not change and supply increases, and when both demand and supply decrease. c. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply increase. d. decreases and supply does not change, when demand does not change and supply decreases, and when both demand and supply decrease.