Consider a perfectly competitive market. What do you expect to happen to the number of firms and firm profitability in the short run and long run if demand for the product falls?
What will be an ideal response?
In the short run, firms will earn negative profit. In the long run, some of these firms will exit the industry, lowering market supply, and raising the market price until remaining firms are earning zero economic profit.
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The tit-for-tat strategy implies that the firms
a. in non-competitive industries match price increases but ignore price decreases b. will follow the lead of the dominant firm in making pricing decisions c. prices will change whenever fixed cost changes d. cooperate on the first round, and then follow your competitors reactions on the second round e. price will only change if demand changes
According to supply-side fiscal policy, reducing tax rates on wages and profits will:
a. create demand-pull inflation. b. lower the price level but may trigger a recession. c. result in stagflation. d. reduce both unemployment and inflation.
A country has a comparative advantage in the good that it can produce
a. at a lower cost in terms of other goods. b. using fewer resources than its trading partner uses. c. at a lower cost than its trading partner can produce. d. using more resources than its trading partner uses.
If the unemployment rate is 6 percent, that means that 6 percent of
a. the population is not working b. potential workers do not have jobs c. the workforce is searching for work but has not found a job at that time d. the individuals who are looking for work cannot find jobs e. the population is not looking for a job