If asset prices fall and inflation expectations remain unchanged, what happens to inflation and unemployment? Defend your answer
Inflation falls and unemployment rises. The decrease in asset prices would cause consumption to fall, so aggregate demand would shift left making prices and output fall. This decrease in demand can be shown as a downward movement along a short-run Phillips curve.
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A monopsonist firm pays a price to a factor that is:
a. equal to the marginal revenue product of the factor. b. greater than the marginal revenue product of the factor. c. equal to the marginal factor cost. d. greater than the marginal factor cost. e. less than the marginal revenue product of the factor.
If people behave as the rational expectations school thinks they do, one result is that adjustments in real output to monetary and fiscal policy changes are
A. smaller. B. larger. C. less predictable. D. in the opposite direction from that predicted by standard analysis.
In the above figure, for a single-price monopolist producing at its profit-maximizing equilibrium price and quantity, the price elasticity of demand at this equilibrium will be
A) greater than 1 and the monopolist's total revenue is maximized. B) less than 1 and the monopolist's economic profit could be larger. C) equal to 1 and the monopolist's total revenue is maximized. D) greater than 1 and the economic profit is maximized but the total revenue is not.
The difficulty of ascertaining the right second-best trade policy to follow
A) reinforces support for the third-best policy approach. B) reinforces support for increasing research capabilities of government agencies. C) reinforces support for abandoning trade policy as an option. D) reinforces support for free-trade options. E) reinforced support for the domestic market failure argument.