Using Figure 1 above, if the aggregate demand curve shifts from AD1 to AD2 the result in the long run would be:
A. P1 and Y2.
B. P2 and Y2.
C. P3 and Y1.
D. P2 and Y3.
Answer: D
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The above figure shows the payoff matrix facing an incumbent firm and a potential entrant. What policy could government adopt to prevent entry deterrence by the incumbent?
A) production quotas B) price ceiling C) safety standards D) None of the above is correct.
Scarcity means that: a. human desires are limited
b. resources are insufficient to satisfy all human desires. c. choices are unnecessary. d. all but the very wealthy must face choices.
Firms may experience diseconomies of scale when
a. they are too small to take advantage of specialization. b. large management structures are bureaucratic and inefficient. c. there are too few employees, and managers do not have enough to do. d. average fixed costs begin to rise again.
The law of one price holds exactly only if
A) buyers have complete information. B) antitrust laws are being enforced. C) it is impossible for buyers to resell the good. D) transactions costs are zero.